Fortnightly - Central Maine Powerhttps://www.fortnightly.com/tags/central-maine-power
enRegulatory Rounduphttps://www.fortnightly.com/fortnightly/2004/12/regulatory-roundup
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Bruce Radford</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><strong>Bruce W. Radford</strong> is editor in chief of <em>Public Utilities Fortnightly</em>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - December 2004</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><b>Path 15 Upgrade. </b>California ISO (Cal-ISO) runs into opposition with its unprecedented plan in Tariff Amendment 63 to make the Western Area Power Administration (WAPA) a "partial" participating transmission owner in the ISO, in trade for WAPA's 10 percent capacity interest (150 MW) in the Path 15 upgrade. Utilities complain that WAPA will receive a 10 percent share of FTRs and congestion revenues, though PG&amp;E and TransElect will have paid for 99.5 percent of the line construction costs. <i>FERC Dkt. Nos. EL04-133, ER04-1198, protests filed Sept. 29, 2004.</i></p>
<p><b>Gas Bypass Pipelines.</b> Oregon appeals court reverses a state public utility commission (PUC) order, says a group of industrial gas users would violate state law providing for exclusive utility franchise rights if it forms a cooperative to bypass the local gas distribution utility and construct a pipeline to deliver gas to its members at retail. <i>NW Nat Gas Co. v. Or. PUC, Nos. 01C-18514, Oct. 13, 2004</i><i>.</i></p>
<p><b>Power Line Communications.</b> Federal Communications Commission (FCC) OKs new rules for BPL (Broadband Over Power Line) systems to create a competitive regulatory framework for the use of existing electric utility lines to provide high-speed communications. <i>ET Dkt. Nos. 04-36, 03-104, Oct. 14, 2004.</i></p>
<p><b>Gen Station Power Needs.</b> Duke Energy said it could support Cal-ISO's claim that it was "stretched thin," and wanted first to gather and study data from power producers before investing money to change its billing and metering protocols and software on netting of on-site station power against unit output. Duke had complained to FERC to force Cal-ISO to conform to FERC precedent to permit its Moss Landing units to net their draws of station power against output from any other unit under common ownership, even if not operating instantaneously, and even if the two units are not directly interconnected. <i>FERC Dkt. No. EL04-130, reply filed Oct. 7, 2004.</i></p>
<p><b>ISO Retail Service. </b>The Maine PUC said it would not require the New England Power Pool (NEPOOL) or ISO New England (ISO-NE) to obtain a utility license to serve an individual consumer (MPEU, or "Market Participant End User") with generation supply taken directly from the New England regional wholesale market. But a private power producer, trader or affiliate who facilitates the deal would require a license as a competitive retail energy provider. <i>Morin Brick Co., Dkt. No. 2004-345, Aug. 27, 2004.</i></p>
<p><b>Renewable Energy Portfolios. </b>California appeals court overturns state PUC order that required electric utilities to pay costs upfront for upgrading regional power grid to accommodate sources of renewable energy to comply with a state law passed in 2002 that mandates a one-percent-per-year increase in renewable energy portfolios maintained by public utilities. <i>So.Cal.Ed. v. CPUC, Cal.App.2d Dist., No. B171050, Aug. 31, 2004.</i></p>
<p><b>Gas Supply Risk. </b>Regulators in Virginia were checking whether to allow Washington Gas Light to reclaim gas customers that had chosen competitive retail service from Metromedia Energy Inc. or to demand a larger security deposit from MME, to cover risk from higher futures prices and MME's increased share of the utility's design-day load.<i> Va.S.C.C. Case No. PUE-2003-00536.</i></p>
<p><b>Fuel Cost Hedging.</b> Georgia PSC rules that Savannah Elec. &amp; Power no longer needs any special financial incentive to operate its fuel cost hedging program, decides to flow fuel cost savings from hedging activities to ratepayers, ending prior practice of sharing 25% of such gains with company shareholders. <i>Dkt. No. 19042-U, Oct. 19, 2004.</i></p>
<p><b>Utility Supply Solicitations. </b>Ohio PUC OK's bidding process for FirstEnergy subsidiary Ohio Edison to solicit offers from power producers for energy supply, to assemble standard-offer portfolios for default retail customers. PUC appoints Charles River Associates to help analyze bids. No single bidder can win right to supply more than 65 percent of utility load. <i>Cause No. 04-1371-<br />EL-ATA, Oct. 6, 2004.</i></p>
<p><b>Provider of Last Resort (POLR).</b> The Pennsylvania PUC OK's three-year term with fixed prices for a POLR tariff for Duquesne Light, citing as irrelevant the utility's claim that it needed a six-year term to cut risk to help its unregulated affiliate buy the Sunbury plant. <i>Case No. P-00032071, Oct. 5, 2004.</i></p>
<p><b>Coal Seam Gas.</b> Utah Public Service Commission (PSC) orders Questar Gas to refund some $25 million collected from customers to cover the cost of processing coal-seam gas produced near Price, Utah, saying that the gas was incompatible with appliances and posed a danger to retail customers. <i>Dkt. Nos. 03-057-057 et al., Aug. 30, 2004.</i></p>
<p><b>Deceptive Marketing Practices.</b> Illinois Commerce Commission rules that private natural gas retailer Peoples Energy Services Corp. violated state law by inviting customers to lock in a fixed price (62 cents per therm) for more than a year, while reserving the right at any time to send a "pricing notice" to customers with a new higher rate that would be binding absent the customer's written objection within days. <i>Case No. 03-0592, July 21, 2004.</i></p>
<p><b>Renewable Portfolio Standards. </b>New Jersey BPU ok's a financing arrangement with the PJM RTO to develop and implement a Generator Attributes Tracking System (GATS) to identify qualifying resources and verify compliance with state programs to promote renewable energy.</p>
<p><b>Retail Electric Competition. </b>Citing significant market power in wholesale power supply, plus a dearth of alternative retail electric vendors, utility regulators in Virginia in a report to the governor (Sept. 1, 2004) questioned whether retail electric competition can bring lower power prices to consumers than would have been the case under traditional regulation.</p>
<p><b>Promotional Utility Advertising.</b> The Maine PUC dismissed a customer complaint that Central Maine Power's campaign of promoting the use of electric-consuming appliances violated the public interest by increasing environmental degradation and domestic dependence on foreign oil. <i>Dkt. No. 2004-481, Sept. 18, 2004.</i></p>
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<a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/alliant">Alliant</a><span class="pur_comma">, </span><a href="/tags/ameren">Ameren</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/aps">APS</a><span class="pur_comma">, </span><a href="/tags/atc">ATC</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/charles-river-associates">Charles River Associates</a><span class="pur_comma">, </span><a href="/tags/cinergy">Cinergy</a><span class="pur_comma">, </span><a href="/tags/citi">Citi</a><span class="pur_comma">, </span><a href="/tags/comed">ComEd</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/communication">Communication</a><span class="pur_comma">, </span><a href="/tags/consumers-power">Consumers Power</a><span class="pur_comma">, </span><a href="/tags/cost">Cost</a><span class="pur_comma">, </span><a href="/tags/dayton-power-light">Dayton Power &amp; Light</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/electric-transmission">Electric Transmission</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/fcc">FCC</a><span class="pur_comma">, </span><a href="/tags/federal-communications-commission">Federal Communications Commission</a><span class="pur_comma">, </span><a href="/tags/federal-communications-commission-fcc">Federal Communications Commission (FCC)</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission-ferc">Federal Energy Regulatory Commission (FERC)</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/firstenergy">FirstEnergy</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/illinois-commerce-commission">Illinois Commerce Commission</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/iso-new-england">ISO New England</a><span class="pur_comma">, </span><a href="/tags/iso-ne">ISO-NE</a><span class="pur_comma">, </span><a href="/tags/lge">LG&amp;E</a><span class="pur_comma">, </span><a href="/tags/lmp">LMP</a><span class="pur_comma">, </span><a href="/tags/locational-marginal-price">Locational marginal price</a><span class="pur_comma">, </span><a href="/tags/locational-marginal-prices">Locational marginal prices</a><span class="pur_comma">, </span><a href="/tags/maine-puc">Maine PUC</a><span class="pur_comma">, </span><a href="/tags/maps">MAPS</a><span class="pur_comma">, </span><a href="/tags/miso">MISO</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/ohio-edison">Ohio Edison</a><span class="pur_comma">, </span><a href="/tags/pge">PG&amp;E</a><span class="pur_comma">, </span><a href="/tags/pjm">PJM</a><span class="pur_comma">, </span><a href="/tags/questar">Questar</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/rto">RTO</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/utah-public-service-commission">Utah Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/wisconsin-public-service">Wisconsin Public Service</a> </div>
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Wed, 31 Dec 2014 15:31:07 +0000meacott18781 at https://www.fortnightly.comThe Ultimate CEOs: Constellation Energy’s Mayo A. Shattuck IIIhttps://www.fortnightly.com/fortnightly/2005/06/ultimate-ceos-constellation-energy%E2%80%99s-mayo-shattuck-iii
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>The CEO Power Forum: Not all utility CEOs are created equal...</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Interview by Richard Stavros</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 2005</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h3><font color="red">Mayo A. Shattuck III</font></h3>
<p><b>Chairman, President and CEO, Constellation Energy</b></p>
<blockquote><p>"Goldman Sachs built the platform. They came from a world of conventional procedures and compliance, and an understanding of rule sets. Almost every other wholesale platform built in Houston and run by cowboys got out of control."</p></blockquote>
<p><font color="red"><b>Public Utilities Fortnightly</b></font> Almost four years ago, in late 2001, on the day you were named CEO, Constellation announced a very dramatic change in the company's strategy. Constellation decided to retain its holding company structure and halt its plan to split its regulated and unregulated businesses. As a result of this decision, Constellation terminated its once highly touted alliance with Goldman Sachs, buying the investment bank out of its interest of the company's joint trading operation for the extraordinary sum of $355 million. Why did Constellation change course so abruptly?</p>
<p><b>Mayo A. Shattuck III</b> The company was a little bit later than most in respect to splitting into the merchant [business] and regulated utility. And I'd say we were later than most in getting approvals and IRS rulings and so forth. By August of 2001, it [began] to be apparent to the company that it was late in the game and that the merchants were beginning to show some stress fractures-stress fractures that people vividly now see in retrospect. But at the time it was not clear that the merchant model was about to fail. Constellation was beginning to feel those stress fractures and admitted to the [investment community] in July of 2001 that [Constellation] wasn't going to come close to meeting their forecasts.</p>
<p>As it turned out I was retiring from the banking world. I was on the board of Constellation for about a year. I was as a board member beginning to push on the notion of not splitting the company and putting the company at risk. When I was retiring, which was really right around [Sept. 11, 2001], the board then came to me and said, 'Would you consider coming to run Constellation?' And I said that I would do that but on the premise that we do not split the company.</p>
<p>Second, by not splitting it turns out that our alliance with Goldman Sachs was put in a very awkward place and they would end up with an illiquid piece of the company as opposed to the liquid piece of the spun-out company. I felt we had to buy out Goldman Sachs. The number appears to be a lot larger than it really was because part of that payment was essentially an accounts payable. It was something that they had already earned and we had not paid out. So, we paid about three times cash flow for that business. It was a very good acquisition for us. It turned out to be a home run later in the story.</p>
<p>As we did those things, there were three major changes; 1) management changed; 2) we elected not split the company; and 3) [we] bought out Goldman Sachs, just as Enron was about to fail. So, there were a lot of dramatic moments at the end of 2001.</p>
<p><font color="red"><b>Fortnightly</b></font> But many prognosticators at the time felt that Constellation's announcement was a signal that the energy company would go back to being a sleepy utility. Why did the company not take that route?</p>
<p><b>Shattuck</b> Well, we could have gone in several different directions. But with the cards we had been dealt, the generation fleet was in fact by definition merchant at that point. What had happened with deregulation in Maryland was that the plants were going to have to compete in the open market. Baltimore Gas &amp; Electric was going to remain as the regulated utility.</p>
<p>But what was clear from the culture of the place. … I was very much an outsider not just to the company but to the industry. The whole mindset of the industry at the time was making electrons and pushing them on to wires. There was no mindset surrounding the other end of the value chain-the customer end. I noticed even we had a mindset-I call [it] "generation-centric"- [and] they felt that capturing the customer end of the value chain didn't matter because at the end of the day they'd always just be making electrons and someone would buy the electrons. What I did at the time was push the organization to understanding whether it was worthwhile building a model around the customer end of the value chain. By that I mean we had a lot of wholesale customers buying electricity from us in other markets like in New England. Our wholesale platform that had been built with Goldman Sachs was really working pretty well, even though people perceived that part of the business as [similar to] trading like Enron. Ours really was not.</p>
<p>We reduced all directional or proprietary trading and focused the business on essentially structured products for other wholesale customers. So, we would sell power to Central Maine Power and those that, like municipalities, didn't have generation. In that way we were able to build a real business that had a certain element of scale to it. We believed that if we could get big enough region-by-region there would be certain scale advantages to being large. And all of the other companies were then going back-to-basics.</p>
<p>As we started this part of the journey, Williams started going down. Reliant. El Paso. There was a collapse where we were able to get into all of these other regions by virtue of buying contracts from others at ridiculously low prices. So, we decided to essentially go for scale at a time when everyone else was retreating, feeling that not only was it a real business, but a business where the scale advantages would manifest themselves later on.</p>
<p><b><font color="red">Fortnightly</font></b> How were you able to go in this direction given the ratings agency pressures on the utility industry to exit this business?</p>
<p><b>Shattuck</b> There was some luck involved. There were some timing advantages in the sense that we recognized the failure of the so-called merchant model earlier than others did. So, we quickly re-capitalized the balance sheet.</p>
<p>When I joined we had a $5.5 billion dollar bridge loan on our books, which had we not re-capitalized right away it would have been a disaster. So, we re-capitalized the balance sheet early and finished by the beginning of 2002. We sold off almost $1 billion of non-core assets. We did everything possible. This was our version of back-to-basics, which was, let's just do energy as opposed to real estate, assisted living centers, and leasing deals on airplanes and things. At the time, we used that expression, 'We're going back-to-basics.' But we didn't mean it in the same way that the industry has now coalesced around back-to-basics being back to regulatory routes. We are now 80/20 the other way-non-regulated/regulated. And no one else had taken that course. But we felt that there was going to be a market vacuum. We went to fill the vacuum and everything was cheap, so we could buy our way into our positions pretty quickly and cheaply.</p>
<p>Yes, it was very much contrarian, but we had a lot of confidence in the fact that the wholesale model worked. To the extent that that was working by the middle of 2002 we started thinking, you know what, we should go down to the retail level. Retail was actually a dirty word at the time because people didn't believe that there were retail models that worked. We coined the word from other industries-actually the commercial and industrial business-"competitive supply." So, we went out and bought New Energy in 2002 and decided we would bring this apparatus, this big risk-management enterprise, down a level to compete for large retail and industrial customers. That has been a home run.</p>
<p><b><font color="red">Fortnightly</font></b> But do you think you are coming full circle to reconsidering the decision that you made in 2001? Do you feel you are not getting full credit from investors for the high growth in your unregulated business precisely because it is tied to a low-growth regulated utility?</p>
<p><b>Shattuck</b> That's a very important question. I've spent my whole life in the capital markets and I felt very strongly that we were not going to chase [price-to-earnings] strategies. If we were chasing P/E strategies we never would have done what we did because everyone essentially felt that so-called trading operations were going to sell at a hugely discounted multiple.</p>
<p>Our view was, first of all, to convince people that it wasn't trading per se. It was a customer-driven structured products business. But it would take a while for people to grasp what that really was. It is a complicated business. It's much more complicated than any other commodities business because of the physical aspects of delivery. Our feeling has been that over time the capital markets will reward us for a unique strategy that is working. We have to build the credibility of making our guidance. It was painful for knowing that the skepticism was high. As you say now, three years later, people understand it, they now give us a premium multiple for it. But at the same time, I'm not inclined to think disgorging our regulated utility is the right thing either. It is prudent, we think, to have a balanced portfolio. I bet we spend a long history debating how balanced that ought to be. But the fact of the matter is, it is a good cash-flow balance to the overall portfolio of businesses.</p>
<p><font color="red"><b>Fortnightly</b></font> How do you propose to maintain consistent 10 percent annual growth per share? Many industry analysts believe you have set quite a high standard for yourself.</p>
<p><b>Shattuck</b> It is a high standard for this industry. It is not really that high a standard for an average American company. So, having come from the world of growth companies in my prior investment banking life, I sort of find it a little bit amusing how challenged I am on that subject. That is why the annual report tries to hit it straight on. The components of growth, we do have a natural organic business where we can build market share against others. We have proven it now for almost four years. The platform is getting bigger and deeper, more regions and more products. Our retail business is now three times larger than the next closest national competitor. The wholesale business is number one in its category (FERC-related volumes). There are certain scale advantages to that, where if you keep lowering your cost structure you are going to be able to drive your penetration. So, that is one-third of the growth. I don't know if it is one-third of the 10 percent. But obviously it was a big contributor to the 17.5 percent [net income] growth rate last year.</p>
<p><font color="red"><b>Fortnightly</b></font> There's been lots of talk over the years of what a utility can and cannot do. Why do you think you were able to push ahead into merchant trading, particularly at a time when so many utilities were exiting that business?</p>
<p><b>Shattuck</b> One of the big advantages that we had was that Goldman Sachs built the platform. They came from a world of conventional procedures and compliance, and an understanding of rule sets. Almost every other wholesale platform built in Houston and run by cowboys got out of control. It got out of control because they didn't have the conventional practices in trading like Goldman had. So, as a consequence, we didn't have a single problem during the California crisis and issues of disclosure. We were very fortunate because of the heritage of the trading platform to be in that position. And I think that had a lot to do with our ability to be a consolidator early because we weren't defending ourselves against prior bad practices.</p>
<p><b><font color="red">Fortnightly</font></b> A lot of people still do not understand how the merchant trading business works. Many view merchant trading as a low-margin business. And the investor community has often highlighted their concern over Constellation maintaining its $3 per MWh margin. Could you explain the way you make money and what the risks are?</p>
<p><b>Shattuck</b> It's a risk-intermediation business. We are the ones forcing the margins down. We're doing it because we believe the most viable long-term strategy is where our scale provides us with a relative cost advantage to our competitors. We have built a very large platform and essentially what we do is sell power under various formulations, terms, and conditions. Given that position, and I can name 15 different kinds of risks associated with it, we are off-loading the risk of that customer who doesn't want to have to deal with price, weather, load variation, congestion, etc. We are taking all of those risks and absorbing them ourselves. Then, to hedge our positions, we procure the corresponding hedge, which, again, has many elements of sophistication to it. That procurement process actually allows us to garner more margin often because we are also providing a service to the generator who doesn't have any front- end sales competency.</p>
<p>So, if you are a generator and you are sitting on power length, Constellation comes to you and says we can essentially serve as your front-end sales arm. We are going to take all this length and we are going to bid a certain price, say below market, but at the same time the generator is saying, "Good for me. That provides me a service because I don't have to worry about the sales process and hedging techniques."</p>
<p>So, as a consequence, on both ends of the spectrum there are customers. We are simply intermediating. And our ability to manage the book of business as it gets larger and larger is a key skill set that is going to be hard for others to compete against given that fact that, yes, we can compete at lower margins than others because we understand the risks involved and we understand essentially how to manage the book. So margin pressure is something that the market does make noise about or seems concerned about. But at the end of the day, we are managing to a certain level of understanding in this realm.</p>
<p>That is what intermediation is in any trading business. It's fine that people worry about it. Maybe it will keep others out of the business, although frankly, we do want a certain number of people in the business to increase the viability and the liquidity in these markets.</p>
<p><b><font color="red">Fortnightly</font></b> Many utility company CEOs are contemplating mergers in the hopes of achieving greater scale and scope. Are you concerned that such mergers could stifle competitive energy market development and affect your business model?</p>
<p><b>Shattuck</b> We're probably the only company with a perspective that scale is important in this part of the business. I think most companies are thinking about fleet management more than anything else. For example, buying more plants and being able to manage them more efficiently. I'm sure you've heard the axiom that the Japanese have seven utilities for half of the population of the United States, and we have 100. So, people suppose that consolidation should and will happen, and I fundamentally believe that too, although the regulatory overlay is so constricting that it is not going to be easy.</p>
<p>Also, because of the execution risks, people will be afraid to take that step. But I do think that it will happen over time, like the Exelon-PSEG merger, and it will happen because there are scale advantages in virtually every business that you can think of.</p>
<p><font color="red"><b>Fortnightly</b></font> What is your comment on Entergy's recent ICT proposal that introduces RTO-like principals to Southeastern markets? As you know, Entergy's proposal differs greatly from the Midwest and Northeast RTOs in scale and scope.</p>
<p><b>Shattuck</b> I think that every effort that leads toward opening the markets is a good one, and it is going to come in fits and starts. It's going to come through concessions to FERC and consolidations. And it is going to come from states getting braver again and embarking on what is a very complicated transition. I think the forces will be there. We have to take the little victories as they come. It is not going come in one massive sweep.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/management-leadership">Management &amp; Leadership</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/people">People</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/0507-FEA1a-Shattuck.jpg" width="545" height="840" alt="" /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/0507-FEA1a-fig1%20constellation.jpg" width="1500" height="981" alt="" /></div><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/0507-FEA1a-fig2%20constellation.jpg" width="1009" height="777" alt="" /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/0507-FEA1a-fig3%20constellation.jpg" width="1009" height="1173" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/mayo-shattuck-iii">Mayo A. Shattuck III</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/goldman-sachs">Goldman Sachs</a><span class="pur_comma">, </span><a href="/tags/baltimore-gas-electric">Baltimore Gas &amp; Electric</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/williams">Williams</a><span class="pur_comma">, </span><a href="/tags/reliant">Reliant</a><span class="pur_comma">, </span><a href="/tags/el-paso">El Paso</a><span class="pur_comma">, </span><a href="/tags/capital-markets">capital markets</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a> </div>
</div>
Thu, 30 Jan 2014 14:13:18 +0000meacott17026 at https://www.fortnightly.comVendor Neutralhttps://www.fortnightly.com/fortnightly/2011/05/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - May 2011</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/1105-VENpic1.jpg" width="991" height="557" alt="Florida Gov. Rick Scott and Florida Senate President Mike Haridopolos were on hand to help Florida Power &amp; Light unveil what FPL called the first hybrid solar power plant in the world—FPL’s Martin Next Generation Solar Energy Center. Spanning approximately 500 acres in western Martin County, Fla., the 75-MW hybrid facility connects a field of more than 190,000 solar thermal mirrors with an existing combined-cycle natural gas power plant to reduce fossil fuel consumption. FPL expects the project to displace " title="Florida Gov. Rick Scott and Florida Senate President Mike Haridopolos were on hand to help Florida Power &amp; Light unveil what FPL called the first hybrid solar power plant in the world—FPL’s Martin Next Generation Solar Energy Center. Spanning approximately 500 acres in western Martin County, Fla., the 75-MW hybrid facility connects a field of more than 190,000 solar thermal mirrors with an existing combined-cycle natural gas power plant to reduce fossil fuel consumption. FPL expects the project to displace combustion of approximately 41 billion cubic feet of natural gas and more than 600,000 barrels of oil—saving customers approximately $178 million in fuel costs over the facility’s estimated 30-year lifetime. The project began initial operations in November 2010." /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/1105-VENpic2.jpg" width="1500" height="898" alt="Columbia Power Technologies deployed its first SeaRay wave-power prototype system in Puget Sound. The sea trials represent a milestone in moving from the pre-commercial stage toward commercial viability for wave power, which generates electricity from ocean swells. Late last year, Columbia Power secured a $2 million Series A private equity infusion from the Oregon Angel Fund, and plans another investment round in 2011." title="Columbia Power Technologies deployed its first SeaRay wave-power prototype system in Puget Sound. The sea trials represent a milestone in moving from the pre-commercial stage toward commercial viability for wave power, which generates electricity from ocean swells. Late last year, Columbia Power secured a $2 million Series A private equity infusion from the Oregon Angel Fund, and plans another investment round in 2011." /></div><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/1105-VENpic3.jpg" width="229" height="354" alt="Energetix Pnu Power developed a range of compressed air batteries as direct replacements for conventional battery and flywheel power backup systems. Supplied as plug-and-play units from 3 kW to 200 kW, the batteries have been deployed by National Grid in the U.K. and United States. Energetix says the systems can be driven from industry standard compressed air cylinders with an auto compressor for recharging, or plant mains air supplies. Pnu Power has also developed a containerized backup power system using " title="Energetix Pnu Power developed a range of compressed air batteries as direct replacements for conventional battery and flywheel power backup systems. Supplied as plug-and-play units from 3 kW to 200 kW, the batteries have been deployed by National Grid in the U.K. and United States. Energetix says the systems can be driven from industry standard compressed air cylinders with an auto compressor for recharging, or plant mains air supplies. Pnu Power has also developed a containerized backup power system using a compressed air battery and a diesel generator." /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/1105-VENpic4_0.jpg" width="730" height="547" alt="Prudent Energy received a grant from the California Public Utilities Commission (CPUC) toward construction and operation of a Vanadium Redox battery energy storage system (VRB-ESS) with SunPower’s PV systems. The grant and construction of the system will be completed in cooperation with SunPower, Pacific Gas and Electric (PG&amp;E), KEMA and Sandia National Laboratories. Prudent’s VRB-ESS energy storage system works similarly to a rechargeable fuel cell, where chemical energy is converted into electrical energy" title="Prudent Energy received a grant from the California Public Utilities Commission (CPUC) toward construction and operation of a Vanadium Redox battery energy storage system (VRB-ESS) with SunPower’s PV systems. The grant and construction of the system will be completed in cooperation with SunPower, Pacific Gas and Electric (PG&amp;E), KEMA and Sandia National Laboratories. Prudent’s VRB-ESS energy storage system works similarly to a rechargeable fuel cell, where chemical energy is converted into electrical energy in a quick manner." /></div><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/1105-VENpic5_0.jpg" width="922" height="1143" alt="The new 480 VAC Magnalight substation from Larson Electronics is designed for installations where native distribution power supply isn’t available." title="The new 480 VAC Magnalight substation from Larson Electronics is designed for installations where native distribution power supply isn’t available." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4>Generation</h4>
<p>Florida Gov. Rick Scott and Florida Senate President Mike Haridopolos were on hand to help <span class="boldred">Florida Power &amp; Light</span> unveil what FPL called the first hybrid solar power plant in the world—FPL’s Martin Next Generation Solar Energy Center. Spanning approximately 500 acres in western Martin County, Fla., the 75-MW hybrid facility connects a field of more than 190,000 solar thermal mirrors with an existing combined-cycle natural gas power plant to reduce fossil fuel consumption. FPL expects the project to displace combustion of approximately 41 billion cubic feet of natural gas and more than 600,000 barrels of oil—saving customers approximately $178 million in fuel costs over the facility’s estimated 30-year lifetime. The project began initial operations in November 2010.</p>
<p><span class="boldred">San Diego Gas &amp; Electric (SDG&amp;E)</span> and a subsidiary of <span class="boldred">CSOLAR Development</span>, a renewable energy company managed by Tenaska Solar Ventures, announced a 25-year contract for up to 150 MW of solar energy to be generated at the Imperial Solar Energy Center West’s proposed 1,057-acre concentrated photovoltaic (CPV) power facility being built near El Centro, Calif. The project will connect with SDG&amp;E’s Imperial Valley substation and its output will be transmitted over the utility’s Sunrise Powerlink transmission line, currently under construction and slated for completion in 2012. Also in connection with the contract, Soltec will build a new factory in the San Diego region to manufacture proprietary CPV modules. With an annual production capacity of 200 MW, the new manufacturing facility will be able to supply other projects in the desert Southwest.</p>
<p>Solar developer <span class="boldred">BlueChip Energy (BCE)</span> acquired land adjacent to two utility substations in Lake County, Fla., for the development of a $200 million, 40-MW capacity solar farm. The project will deploy an estimated 140,000 solar panels and will be built in stages. Solar panels and racking systems are expected to be provided by <span class="boldred">Advanced Solar Photonics</span> (ASP), the manufacturing subsidiary of BCE, for 75 percent of the project. Additional equity partners are expected to provide the remaining 25 percent of the modules. The company had originally planned to lease the Lake County property but later decided to purchase the land in order to enhance the “bankability” of the project. The power produced is intended to be sold locally and regionally under power purchase agreements.</p>
<p><span class="boldred">CanTex Energy</span> completed the second installment of payments to <span class="boldred">Wind Tex Energy</span> for the exclusive rights to lease an additional 30,000 acres (total of 56,000 acres) of leases to the Lynn and Lenorah wind projects totaling 400 MW of capacity. The company says it will apply for an interconnect agreement and use existing transmission line capacity as part of a power purchase agreement in the Southwest Power Pool (SPP). Both projects will be able to supply into ERCOT when the Central location of the competitive renewable energy zone (CREZ) transmission line is completed by early 2013, connecting at the Long Draw 345 Kv switching station in Borden County, Texas. The project financing will require $25 million pre-construction and $810 million in construction financing. Plans are to install 2.75 MW or 3.0 MW turbines. </p>
<p> </p>
<p><span class="boldred">Juhl Wind</span> completed the $42 million Adams Wind Project in Meeker County in west-central Minnesota. The project, which was announced in December 2009, includes 12 Alstom Eco 86 wind turbines, to provide about 20 MW of wind capacity. <span class="boldred">Xcel Energy</span> will buy energy produced by the Juhl Wind project under a 20-year agreement. The wind farm is owned by local residents and farmers.</p>
<p><span class="boldred">WindTamer Corp.’s</span> board of directors approved changing the name of the company to Arista Power, Inc. The name change is subject to stockholder approval at the Annual Meeting of Stockholders to be held on May 18, 2011. The company will continue to use the “WindTamer” brand name on its wind turbines. The company intends to apply for a change in its ticker symbol immediately following stockholder approval of the name change.</p>
<p><span class="boldred">U.S. Energy Secretary Steven Chu</span> offered a conditional $102 million loan guarantee to support the Record Hill wind project, which includes a 50.6-MW wind farm and an eight-mile transmission line and associated interconnection equipment near the town of Roxbury, Maine. Developed and managed by <span class="boldred">Wagner Wind Energy</span> of New Hampshire and <span class="boldred">Independence Wind</span> of Maine, Record Hill is sponsored by the Yale University Endowment fund. The facility will consist of 22 <span class="boldred">Siemens</span> SWT-2.3-93 turbines and new transmission lines to interconnect with Central Maine Power. The turbines will be installed with turbine load control (TLC) technology, a system of sensors and processing software that allows the turbines to continue to generate electricity under turbulent conditions, rather than be shut down completely. TLC is also expected to reduce wear-and-tear on the turbines, reduce operation and management costs, and preserve the lifetime of the turbine components.</p>
<p><span class="boldred">GE</span> introduced its 4.1-113 wind turbine, a 4-MW-class machine designed for offshore use. GE signed a contract to supply a 4.1-113 wind turbine, along with associated services, to Göteborg Energi for installation in the Gothenburg, Sweden, harbor in the second half of 2011. The project is supported by the Swedish Energy Agency. GE says the direct-drive technology provides a simple, reliable design with built-in redundancy to ensure reliability at sea. Also the modular design is intended to simplify in-situ repair and reduce the need for large repair vessels. The new turbine builds on GE’s 3.5 MW direct-drive design.</p>
<p><span class="boldred">The U.S. Department of Energy’s National Renewable Energy Laboratory</span> (NREL) released its first call for proposals from wind industry companies interested in forming a partnership with NREL to test a multi-megawatt wind turbine drivetrain. The drivetrain will be tested in NREL’s new 5-MW drivetrain test facility, scheduled for completion by the end of June 2012.</p>
<p><span class="boldred">Siemens Energy’s Instrumentation</span>, Controls &amp; Electrical (IC&amp;E) Business Unit signed two new contracts for its plant-wide distributed control systems. Siemens will upgrade the existing control systems of five Oglethorpe Power Corp. (OPC) power plants in Georgia with the Siemens Power Plant Automation T3000 (SPPA-T3000) system. Additionally, Voith Hydro, Inc., sub-contractor for American Municipal Power (AMP), contracted Siemens to install and test its SPPA-E3000 electrical system at four new power houses of AMP’s 313-MW Ohio River project. The upgrades are scheduled to be implemented between March 2011 and March 2014.</p>
<p><span class="boldred">Columbia Power Technologies</span> deployed its first SeaRay wave-power prototype system in Puget Sound. The sea trials represent a milestone in moving from the pre-commercial stage toward commercial viability for wave power, which generates electricity from ocean swells. Late last year, Columbia Power secured a $2 million Series A private equity infusion from the Oregon Angel Fund, and plans another investment round in 2011.</p>
<h4>Metering</h4>
<p>Duke Energy chose Verizon Wireless to provide a telecommunications network for the Envision: Charlotte building efficiency project. Duke Energy will gather and aggregate energy usage data from about 70 participating buildings in Charlotte’s 1.94 square mile I-277 inner-belt loop. The information will then be streamed to large interactive lobby-level screens provided by Cisco. Building tenants will see the nearly real-time commercial energy consumption data for the community and suggested actions they can take to reduce their personal energy usage in the office.</p>
<p>DTE Energy plans to install an additional 350,000 electric meters to provide the backbone for its SmartCurrents program, which will allow electric customers to communicate with the company, provide detailed information about their energy usage and recognize power outages without customer input. DTE Energy has installed about 250,000 smart meters so far, and expects about 600,000 meters will be installed by early 2012.</p>
<p>The National Rural Telecommunications Cooperative (NRTC) entered a value-added reseller (VAR) agreement with Sensus. Through the partnership NRTC will offer Sensus smart grid technologies to its members including the FlexNet advanced metering infrastructure (AMI) system, smart meters, distribution automation and demand response solutions. In response to requests from co-op members for a wireless AMI solution, NRTC evaluated various technologies before partnering with Sensus.</p>
<p>SECO Energy selected Sensus as its smart grid technology provider. Sensus will provide the Florida cooperative its FlexNet AMI communications network and more than 172,000 electric meters equipped with remote connect and disconnect capabilities. SECO selected Sensus after a six-month pilot test of the FlexNet AMI network and 1,200 electric meters. SECO expects the smart grid program will help reduce the cost and staff time required for manual meter reads and will alert the utility about meter theft and tampering.</p>
<h4>Conservation &amp; Efficiency</h4>
<p><span class="boldred">Lockheed Martin</span> was selected to implement and manage the <span class="boldred">Con Edison</span> commercial and industrial (C&amp;I) energy efficiency programs. Con Edison promotes the program to C&amp;I customers in New York City and Westchester County.</p>
<p><span class="boldred">Servidyne</span> started work on an approximately $1.3 million energy efficiency project for <span class="boldred">Cobb County, Ga</span>. The project, which is being funded by the American Recovery and Reinvestment Act of 2009 (ARRA) through the energy efficiency and conservation block grant program, is expected to save Cobb County’s taxpayers at least $300,000 a year in avoided utility costs. The company expects to complete its project work by about September 2011.</p>
<p>The <span class="boldred">Montgomery County Correctional Facility</span> in Eagleville, Pa., awarded a contract to Honeywell to help upgrade its infrastructure and save an estimated $2.5 million in utility and operating costs. Honeywell says the $2.4-million energy conservation and building modernization program, which is supported by ARRA funds, will reduce water and energy consumption, and strengthen safety and security for staff and inmates at the 600-bed prison. Honeywell guarantees savings under a 10-year performance contract. Honeywell expects to complete the upgrades in the first half of 2011, with additional improvements planned to start by year’s end.</p>
<p><span class="boldred">Bluestone Energy Services</span> was selected by New Hampshire’s Pay for Performance (P4P) Program as an energy efficiency partner. The Pay for Performance Program is funded by proceeds from the auction of carbon allowances through New Hampshire’s participation in the Regional Greenhouse Gas Initiative (RGGI). Bluestone Energy recently completed an energy conservation project for Stonewall Kitchen’s Rochester, N.H. distribution center. The project saved 520,000 kWh and earned over $50,000 in utility incentives from PSNH.</p>
<p><span class="boldred">Ameresco</span> signed an energy saving performance contract with Monroe County (Mississippi) school district for six schools and facilities totaling 368,000 square feet. Initiatives include boiler replacements, lighting upgrades and water conservation measures. An ARRA grant provided 25 percent of total costs associated with the performance contract, with the other 75 percent being funded through a tax-exempt lease and paid for out of guaranteed energy savings.</p>
<h4>EVs &amp; Storage</h4>
<p><span class="boldred">DTE Energy</span> selected <span class="boldred">SPX Service Solutions</span> to provide turnkey electric vehicle (EV) home charging installation services for up to 2,500 residential customers participating in the utility’s EV rate pilot program. The program offers lower rates for customers to charge EVs, as well as company-provided charging stations and funding toward installation. SPX is expected to manage all aspects of home charging, including home surveys, 240-volt charging station installations, permitting, inspections, coordination with the utility, and post-installation services.</p>
<p><span class="boldred">Reno Contracting</span> entered into a strategic alliance with <span class="boldred">Envision Solar</span> to build integrated solar parking arrays for EVs in locations throughout the Southwest. Plans call for a first project during 2Q 2011.</p>
<p><span class="boldred">Energetix Pnu Power</span> developed a range of compressed air batteries as direct replacements for conventional battery and flywheel power backup systems. Supplied as plug-and-play units from 3 kW to 200 kW, the batteries have been deployed by National Grid in the U.K. and United States. Energetix says the systems can be driven from industry standard compressed air cylinders with an auto compressor for recharging, or plant mains air supplies. Pnu Power has also developed a containerized backup power system using a compressed air battery and a diesel generator.</p>
<p><span class="boldred">Prudent Energy</span> received a grant from the <span class="boldred">California Public Utilities Commission</span> (CPUC) toward construction and operation of a Vanadium Redox battery energy storage system (VRB-ESS) with SunPower’s PV systems. The grant and construction of the system will be completed in cooperation with SunPower, Pacific Gas and Electric (PG&amp;E), KEMA and Sandia National Laboratories. Prudent’s VRB-ESS energy storage system works similarly to a rechargeable fuel cell, where chemical energy is converted into electrical energy in a quick manner.</p>
<h4>Smart Grid and T&amp;D</h4>
<p><span class="boldred">Larson Electronics</span> introduced the Magnalight MGS-DC-30KVA-480-220-110, a heavy duty power distribution substation that converts single-phase or three-phase 480V AC electrical current to single-phase 120V AC and 240V AC. The substation is designed to supply current for operating equipment and lighting in areas where connection to native power is unavailable or not desired. This unit can be used to tap into 480V AC from a variety of sources including generators and direct grid power, which it then steps down to usable voltages, and includes a dedicated 480-volt feed through for connecting a welding station.</p>
<p><span class="boldred">Demand Response Coordinating Committee</span> (DRCC) is changing its membership structure to become a home for individuals that consider themselves DR and smart grid professionals. To reflect this change, the DRCC has changed its name to the Association for Demand Response &amp; Smart Grid (ADS).</p>
<p><span class="boldred">Infosys Technologies</span> and <span class="boldred">Oracle</span> completed a business transformation program incorporating the implementation of Oracle Utilities network management system at Seattle City Light, one of the nation’s largest municipally owned utilities. The Oracle system, selected in 2009, provides real-time information sharing to help Seattle City Light coordinate service restoration efforts.</p>
<p><span class="boldred">Elster</span> is working with <span class="boldred">Science Applications International Corp.</span> (SAIC) to deliver a comprehensive hosted smart grid solution that will empower utilities with a variety of advanced functionalities across electric, water and gas infrastructures. The full life-cycle offering will enable utility customers the opportunity to realize the benefits of smart grid as a service (SGaaS), such as demand response (DR), distribution automation (DA), meter data management (MDM), voltage conservation, transformer monitoring, EV charging and more. The joint solution will build on Elster’s EnergyAxis smart grid solution and SAIC’s Tier 3 SAS 70 Type II service.</p>
<p><span class="boldred">Progress Energy</span> selected <span class="boldred">IBM</span> as the lead systems integrator for the utility’s smart grid program. IBM will provide expertise in smart grid technologies; system planning, architecture, integration and implementation; business process design and development; and business analytics.</p>
<h4>M&amp;A</h4>
<p><span class="boldred">Alstom</span> acquired <span class="boldred">Utility Integration Solutions Inc.</span> (UISOL) of Santa Clara, California. UISOL, a systems integration company, develops and commercializes DRBizNet, a software platform for demand response management. UISOL will be a wholly-owned Alstom Grid subsidiary, maintaining its consulting and systems integration business lines, and will leverage Alstom’s worldwide presence to grow on international markets. Alstom Grid plans to invest in UISOL’s software division to expand its DRBizNet solution and meet growing customer requirements.</p>
<p><span class="boldred">DPL Inc.</span> purchased Chicago-based retail electricity supplier <span class="boldred">MC Squared Energy Services, LLC</span> (mc2), which serves approximately 2,000 customer accounts in northern Illinois. The transaction will be executed by DPL’s retail electric subsidiary, DPL Energy Resources (DPLER) as purchaser. Terms weren’t disclosed. DPLER markets electricity to commercial and business customers in Ohio.</p>
<p> </p>
<p><span class="boldred">TRC Companies</span> acquired privately-held <span class="boldred">Alexander Utility Engineering</span> (AUE) through a combination of cash, stock and subordinated debt. Headquartered in San Antonio, Texas, AUE is an engineering and design firm that provides a range of services to the electric utility and communications utility marketplaces. AUE’s revenue for 2010 was approximately $3 million. TRC expects the transaction to be accretive in fiscal 2011.</p>
<p> </p>
<p> </p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/generation-markets">Generation &amp; Markets</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/td-grid">T&amp;D Grid</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/finance">Finance</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/vendor-neutral">Vendor Neutral</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/advanced-solar-photonics">Advanced Solar Photonics</a><span class="pur_comma">, </span><a href="/tags/alexander-utility-engineering">Alexander Utility Engineering</a><span class="pur_comma">, </span><a href="/tags/alstom">Alstom</a><span class="pur_comma">, </span><a href="/tags/alstom-grid">Alstom Grid</a><span class="pur_comma">, </span><a href="/tags/ameresco">Ameresco</a><span class="pur_comma">, </span><a href="/tags/american-municipal-power">American Municipal Power</a><span class="pur_comma">, </span><a href="/tags/american-recovery-and-reinvestment-act">American Recovery and Reinvestment Act</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/amp">AMP</a><span class="pur_comma">, </span><a href="/tags/arra">ARRA</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/bluechip-energy">BlueChip Energy</a><span class="pur_comma">, </span><a href="/tags/bluestone-energy-services">Bluestone Energy Services</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities-commission">California Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/cantex-energy">CanTex Energy</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/cisco">Cisco</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/con-edison">Con Edison</a><span class="pur_comma">, </span><a href="/tags/conservation">Conservation</a><span class="pur_comma">, </span><a href="/tags/cpuc">CPUC</a><span class="pur_comma">, </span><a href="/tags/cpv">CPV</a><span class="pur_comma">, </span><a href="/tags/crez">CREZ</a><span class="pur_comma">, </span><a href="/tags/cso">CSO</a><span class="pur_comma">, </span><a href="/tags/csolar-development">CSOLAR Development</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/dg">DG</a><span class="pur_comma">, </span><a href="/tags/dpl">DPL</a><span class="pur_comma">, </span><a href="/tags/dpl-inc">DPL Inc.</a><span class="pur_comma">, </span><a href="/tags/dr">DR</a><span class="pur_comma">, </span><a href="/tags/dte-energy">DTE Energy</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/e3">E3</a><span class="pur_comma">, </span><a href="/tags/elster">Elster</a><span class="pur_comma">, </span><a href="/tags/energetix-pnu-power">Energetix Pnu Power</a><span class="pur_comma">, </span><a href="/tags/energy-secretary-steven-chu">Energy Secretary Steven Chu</a><span class="pur_comma">, </span><a href="/tags/energyaxis-0">EnergyAxis</a><span class="pur_comma">, </span><a href="/tags/envision-solar">Envision Solar</a><span class="pur_comma">, </span><a href="/tags/ercot">ERCOT</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/evs">EVs</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/honeywell">Honeywell</a><span class="pur_comma">, </span><a href="/tags/hydro">Hydro</a><span class="pur_comma">, </span><a href="/tags/ibm">IBM</a><span class="pur_comma">, </span><a href="/tags/imperial-valley">Imperial Valley</a><span class="pur_comma">, </span><a href="/tags/independence-wind">Independence Wind</a><span class="pur_comma">, </span><a href="/tags/infosys">Infosys</a><span class="pur_comma">, </span><a href="/tags/infosys-technologies">Infosys Technologies</a><span class="pur_comma">, </span><a href="/tags/integration">Integration</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/juhl-wind">Juhl Wind</a><span class="pur_comma">, </span><a href="/tags/kema">KEMA</a><span class="pur_comma">, </span><a href="/tags/larson-electronics">Larson Electronics</a><span class="pur_comma">, </span><a href="/tags/lockheed">Lockheed</a><span class="pur_comma">, </span><a href="/tags/lockheed-martin">Lockheed Martin</a><span class="pur_comma">, </span><a href="/tags/mc-squared-energy-services">MC Squared Energy Services</a><span class="pur_comma">, </span><a href="/tags/mdm">MDM</a><span class="pur_comma">, </span><a href="/tags/montgomery-county-correctional-facility">Montgomery County Correctional Facility</a><span class="pur_comma">, </span><a href="/tags/national-grid">National Grid</a><span class="pur_comma">, </span><a href="/tags/national-renewable-energy-laboratory-0">National Renewable Energy Laboratory</a><span class="pur_comma">, </span><a href="/tags/national-rural-telecommunications-cooperative">National Rural Telecommunications Cooperative</a><span class="pur_comma">, </span><a href="/tags/nrel-0">NREL</a><span class="pur_comma">, </span><a href="/tags/nrtc">NRTC</a><span class="pur_comma">, </span><a href="/tags/oracle">Oracle</a><span class="pur_comma">, </span><a href="/tags/oracle-utilities">Oracle Utilities</a><span class="pur_comma">, </span><a href="/tags/ot">OT</a><span class="pur_comma">, </span><a href="/tags/pacific-gas-and-electric">Pacific Gas and Electric</a><span class="pur_comma">, </span><a href="/tags/ppa">PPA</a><span class="pur_comma">, </span><a href="/tags/progress">Progress</a><span class="pur_comma">, </span><a href="/tags/progress-energy">Progress Energy</a><span class="pur_comma">, </span><a href="/tags/prudent-energy">Prudent Energy</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/pv-systems">PV systems</a><span class="pur_comma">, </span><a href="/tags/recovery">Recovery</a><span class="pur_comma">, </span><a href="/tags/regional-greenhouse-gas-initiative">Regional Greenhouse Gas Initiative</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/reno-contracting">Reno Contracting</a><span class="pur_comma">, </span><a href="/tags/rggi">RGGI</a><span class="pur_comma">, </span><a href="/tags/saic">SAIC</a><span class="pur_comma">, </span><a href="/tags/science-applications-international-corp">Science Applications International Corp</a><span class="pur_comma">, </span><a href="/tags/science-applications-international-corp-0">Science Applications International Corp.</a><span class="pur_comma">, </span><a href="/tags/seco-energy">SECO Energy</a><span class="pur_comma">, </span><a href="/tags/sensus">Sensus</a><span class="pur_comma">, </span><a href="/tags/servidyne">Servidyne</a><span class="pur_comma">, </span><a href="/tags/siemens">Siemens</a><span class="pur_comma">, </span><a href="/tags/siemens-energy">Siemens Energy</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/southwest-power-pool">Southwest Power Pool</a><span class="pur_comma">, </span><a href="/tags/spp">SPP</a><span class="pur_comma">, </span><a href="/tags/spx-service-solutions">SPX Service Solutions</a><span class="pur_comma">, </span><a href="/tags/steven-chu">Steven Chu</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/sunpower">SunPower</a><span class="pur_comma">, </span><a href="/tags/tenaska-solar-ventures">Tenaska Solar Ventures</a><span class="pur_comma">, </span><a href="/tags/trc">TRC</a><span class="pur_comma">, </span><a href="/tags/trc-companies">TRC Companies</a><span class="pur_comma">, </span><a href="/tags/us-department-energy">U.S. Department of Energy</a><span class="pur_comma">, </span><a href="/tags/us-energy-secretary-steven-chu">U.S. Energy Secretary Steven Chu</a><span class="pur_comma">, </span><a href="/tags/uisol">UISOL</a><span class="pur_comma">, </span><a href="/tags/utility-integration-solutions">Utility Integration Solutions</a><span class="pur_comma">, </span><a href="/tags/verizon">Verizon</a><span class="pur_comma">, </span><a href="/tags/verizon-wireless">Verizon Wireless</a><span class="pur_comma">, </span><a href="/tags/wagner-wind-energy">Wagner Wind Energy</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a><span class="pur_comma">, </span><a href="/tags/wind-tex-energy">Wind Tex Energy</a><span class="pur_comma">, </span><a href="/tags/xcel-energy">Xcel Energy</a> </div>
</div>
Sun, 01 May 2011 04:00:00 +0000puradmin14112 at https://www.fortnightly.comVendor Neutralhttps://www.fortnightly.com/fortnightly/2011/03/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - March 2011</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/1103-VENpic1.jpg" width="1492" height="1448" alt="Ford’s new Focus Electric uses new smart-charging software from Microsoft, including a smartphone app that allows users to control their vehicles remotely." title="Ford’s new Focus Electric uses new smart-charging software from Microsoft, including a smartphone app that allows users to control their vehicles remotely." /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/1103-VENpic2.jpg" width="1500" height="996" alt="Midwest ISO employees got a chance to test drive the ThinkCity electric vehicle, which Energy Systems Network is promoting in the Indianapolis metro area. " title="Midwest ISO employees got a chance to test drive the ThinkCity electric vehicle, which Energy Systems Network is promoting in the Indianapolis metro area. " /></div><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/1103-VENpic3.jpg" width="941" height="617" alt="Central Maine Power contracted TRC Companies to provide engineering, design and procurement services for five substation projects. Pictured: Progress on the new Albion Road Substation in Benton, Maine." title="Central Maine Power contracted TRC Companies to provide engineering, design and procurement services for five substation projects. Pictured: Progress on the new Albion Road Substation in Benton, Maine." /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/1103-VENpic4.jpg" width="1500" height="1000" alt="The 30 MW Cimarron solar facility, developed by Southern Company and Ted Turner, went online in December 2010. " title="The 30 MW Cimarron solar facility, developed by Southern Company and Ted Turner, went online in December 2010. " /></div><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/1103-VENpic5.jpg" width="409" height="749" alt="Constellation Energy is using Verizon connectivity to provide access to its customer energy management applications." title="Constellation Energy is using Verizon connectivity to provide access to its customer energy management applications." /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/1103-VENpic6.jpg" width="1488" height="2240" alt="As part of KCP&amp;L’s smart grid demonstration, Siemens is installing electric vehicle charging stations in the Kansas City project area." title="As part of KCP&amp;L’s smart grid demonstration, Siemens is installing electric vehicle charging stations in the Kansas City project area." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4>EVs &amp; Storage</h4>
<p><span class="boldred">Ford Motor Co. </span>unveiled the Focus Electric, the company’s first-ever all-electric passenger car, at the Consumer Electronics Show in January. Ford says the Focus is the flagship of its line of hybrid, plug-in hybrid and all-electric vehicles coming to North America and Europe by 2013. The Focus Electric will launch in late 2011 and introduces a new version of the MyFord Touch driver connect system especially for electric vehicles, using Microsoft technology and a smartphone app called MyFord Mobile that helps plug-in owners control their vehicles remotely. The Focus Electric’s lithium-ion battery pack features liquid cooling and heating to help maintain charge and extend battery life. The company says the car will go about 100 miles on a charge. Ford also is offering customers a 240-volt wall-mounted charge station that will be sold separately, reportedly for about $1,500, that will provide a full recharge in about 3.5 hours. After federal tax incentives, the basic Focus Electric will carry a sticker price of about $33,500. Both Focus gasoline and electric variants to be sold in North America will be built at Ford’s Michigan Assembly Plant in Wayne, Mich.</p>
<p><span class="boldred">Midwest ISO</span> arranged for dozens of its employees to test drive—and buy—plug-in electric vehicles (PEVs), manufactured by electric car maker THINK. The Ride &amp; Drive event was sponsored by Energy Systems Network as part of Project Plug-IN, an initiative to bring electric cars to the streets of central Indiana. The Midwest ISO plans to install a charging station at its headquarters in Carmel, Ind. Project Plug-IN aims to introduce plug-in vehicles in the Indianapolis metropolitan area, with plans to install more than 200 charging stations throughout the region.</p>
<p><span class="boldred">The Electric Power Research Institute (EPRI)</span> and the <span class="boldred">Tennessee Valley Authority</span> demonstrated a new prototype six-bay integrated solar-assisted electric vehicle charging station at the EPRI laboratory in Knoxville, Tenn. EPRI says it’s among the first stations in the U.S. that incorporates energy storage technology into the design. The prototype station will produce data that will assist in implementing key components of a smart grid, such as integrating renewable energy onto the grid, assessing the impact on reliability of distributed resources, testing advance metering infrastructure, and analyzing electric vehicle equipment.</p>
<p><span class="boldred">Zigbee Alliance</span> and <span class="boldred">SAE International</span> collaborated on ZigBee Smart Energy standard development. Their efforts aim to make ZigBee Smart Energy the preferred technology supporting plug-in electric vehicles (PEV) and enabling essential vehicle to grid (V2G) communication and power capabilities. This initiative will provide future PEV drivers with real-time information to control transportation energy use, manage charging costs and apply utility program incentives. It also provides control functions to manage PEV charging while maintaining grid integrity. ZigBee says Smart Energy version 2.0 is scheduled for completion next year.</p>
<p><span class="boldred">ZBB Energy</span> successfully tested and delivered its ZESS POWR PECC and ZESS 50 energy storage solutions to the energy lab at University of Wisconsin-Milwaukee’s College of Engineering &amp; Applied Science. WERC researchers will use ZBB technology to study individual wind turbines and remodel an entire wind farm system to improve reliability and dispatchability.</p>
<p><span class="boldred">A123 Systems</span> received an order from AES Gener for 20 MW of A123’s advanced energy storage solutions for a spinning reserve project at the site of the new 500 MW Angamos power plant in Northern Chile. The project expands the relationship between A123 and AES Energy Storage and is AES’ second in Chile to use A123 energy storage technology. In 2009 the companies announced the commercial operation of a 12-MW spinning reserve project at AES Gener’s Los Andes substation in the Atacama Desert, reportedly the first energy storage system deployed in Chile. The energy storage capacity is intended to help Gener maintain the stability of its electric grid.</p>
<p>The U.S. Army Communications-Electronics Research, Development, and Engineering Center awarded <span class="boldred">UltraCell</span> a contract to advance a fuel cell system for the Coalition Warfare Program. The contract award is valued at $999,000. Under the contract, UltraCell engineers will use a 150-Watt fuel cell system prototype, originally developed for the United Kingdom Ministry of Defense.</p>
<h4>Transmission</h4>
<p> </p>
<p><span class="boldred">Central Maine Power (CMP) </span>awarded an $11.4 million contract to TRC Companies to provide engineering, design and procurement services associated with the modification and expansion of five existing substations. The project is part of a CMP program to modernize Maine’s transmission system. Under the contract, TRC will deliver detailed designs for the expansion of the five substations, 345 kV and 115 kV in size. TRC will also manage the procurement of materials associated with design and construction and will provide overall project management services.</p>
<p><span class="boldred">Southern California Edison (SCE) </span>implemented and deployed Autodesk’s utility solutions to its transmission and distribution business unit. The solution, which includes Autodesk utility design software and subscription professional services, is helping SCE to streamline workflows where engineering and construction standards are linked to the design process.</p>
<p><span class="boldred">ABB</span>’s Network Manager market management system (MMS) is being used to administer the wholesale power market for the <span class="boldred">Electric Reliability Council of Texas (ERCOT)</span>. Under the management of ABB’s MMS, which ABB says is fully compatible with existing third-party systems, the new market system will deliver rapid and detailed electricity price calculations and scheduling, enabling effective management of electricity supply and demand.</p>
<h4>People</h4>
<p>Maryland Gov. Martin O’Malley appointed <span class="boldred">Eric Wachsman</span> and <span class="boldred">George Ashton</span> to the board of directors of the <span class="boldred">Maryland Clean Energy Center</span>.</p>
<p><span class="boldred">Ronald Moe</span> was named vice president of <span class="boldred">SAIC Energy’s Asset Transaction Services Practice</span>. Previously Moe served as the senior vice president and head of Ventyx Advisors. He also held management positions at R. W. Beck, now an SAIC company; Jacobs Consultancy; and Stone &amp; Webster Management Consultants.</p>
<p><span class="boldred">Evergreen Solar</span> appointed <span class="boldred">Donald W. Reilly</span> as CFO, Reilly replaces Paul Kawa who had been serving as interim CFO since September 2010.</p>
<p><span class="boldred">Southwest Solar Technologies</span> appointed <span class="boldred">Bradley P. Forst</span> as its new CEO. Forst was formerly the president and CEO of Simula and president and CEO of Gradient Analytics Inc.</p>
<p><span class="boldred">Cupertino Electric</span> announced that former v.p. of Energy Alternatives <span class="boldred">John Curcio</span> has been promoted to COO. <span class="boldred">Paul Aggarwal</span> is taking over Curcio’s role in the Energy Alternatives Division as v.p. of operations.</p>
<p>Conservation Services Group announced <span class="boldred">Janja Lupse</span> as New Jersey program director.</p>
<p>The board of directors at <span class="boldred">BPL Global</span> appointed <span class="boldred">Pete Londa</span> as acting CEO, succeeding Keith Schaefer.</p>
<h4>Generation</h4>
<p><span class="boldred">Southern Company and Ted Turner</span> partnered to energize the Cimarron Solar Facility, a 30-MW photovoltaic plant. Cimarron will supply power to the member electric cooperatives of Tri-State Generation and Transmission Association. Initially expected to go on line by the end of 2010, the facility was completed in eight months and began commercial operation in early December. <span class="boldred">First Solar</span> developed and constructed the facility and will provide operation and maintenance services under a long-term contract. Southern Company and Turner Renewable Energy acquired the project from First Solar in March 2010. Turner Renewable Energy is a wholly owned subsidiary of Turner Enterprises with a focus on development of commercial-scale solar projects. The 364-acre plant site is located within the service territory of Tri-State member system Springer Electric Cooperative in Colfax County, N.M., and is adjacent to Turner’s Vermejo Park ranch.</p>
<p><span class="boldred">Sempra Generation</span> selected <span class="boldred">Suntech Power Holdings</span> to design and construct the 150-MW Mesquite Solar 1 project in Arizona, which will sell power to <span class="boldred">Pacific Gas &amp; Electric</span> under a 20-year power purchase agreement, pending California Public Utilities Commission (CPUC) approval. Construction is slated to begin in mid-2011, with completion by 2013. Zachry will oversee the installation and integration of more than 800,000 Suntech multi-crystalline solar panels at the site.</p>
<p><span class="boldred">San Diego Gas &amp; Electric (SDG&amp;E)</span> and <span class="boldred">Pattern Energy</span> announced a 20-year contract for 315 MW of wind energy to be generated at Pattern’s Ocotillo Wind Energy Facility near Ocotillo, Calif., approximately 25 miles west of El Centro in the Imperial Valley. Pending government approvals, Pattern plans to complete the project by the end of 2012 to coincide with a 2012 in-service date for the 500-kilovolt Sunrise Powerlink transmission line, currently under construction. SDG&amp;E has signed four renewable power contracts in the past nine months totaling 600 MW to be transmitted across the Sunrise Powerlink. SDG&amp;E committed to obtaining 33 percent of its electricity from renewable resources by 2020.</p>
<p><span class="boldred">Southern California Edison (SCE) </span>signed contracts with <span class="boldred">SunPower Corp.</span> and <span class="boldred">Fotowatio Renewable Ventures</span> (FRV) for more than 800 MW of solar power generation, including output from one of the largest single solar PV installations (325 MW) in the United States.</p>
<p><span class="boldred">GreenCo Solutions</span> and <span class="boldred">North Carolina Electric Membership Corp.</span> entered 20-year contracts to acquire renewable energy certificates and electricity, respectively, from a new solar project <span class="boldred">Duke Energy</span> is acquiring from <span class="boldred">SunPower</span>. Groundbreaking at the 6.4 MW (DC) Murfreesboro Solar Project (equivalent to 5 MW AC) is expected this spring with startup in late 2011. GreenCo Solutions, a company owned by 22 electric cooperatives, will buy RECs generated by the facility to assist its members in meeting their solar power requirement under North Carolina’s renewable portfolio standard.</p>
<p><span class="boldred">Pepco Energy Services</span> reached an agreement to design and construct a $2.3 million photovoltaic (PV) project for the <span class="boldred">Department of Energy</span> at the Germantown, Md., campus. The project will be implemented under the U.S. General Services Administration’s Utility Energy Services Contract (UESC) with Pepco. The 10-month construction project, which began in October 2010, includes a 300-kW solar PV ground-mounted array and a 52-kW solar PV carport array with a Class II electric car charging station. Both the ground array and the carport array are expected to be operational by July 2011. The project uses monocrystalline PV modules manufactured by the Federal Prison Industries (FPI).</p>
<h4>Demand Response</h4>
<p><span class="boldred">Constellation Energy</span> partnered with Verizon to provide a new customer-access portal, NewEnergy Online, and demand response application, VirtuWatt, to enable customers to view their energy consumption information round-the-clock, from any location with Internet access. In addition, Verizon is providing Constellation Energy with a variety of other products and services to enable the Baltimore-based company to increase efficiency and better connect its employees and support collaboration across the enterprise.</p>
<h4>Smart Grid</h4>
<p><span class="boldred">Modesto Irrigation District</span> awarded a new contract to <span class="boldred">Open Systems International (OSI) </span>for a multi-phased real-time volt/VAR control system project. Based on the OSI Spectra distribution management system (DMS) platform, the system is intended to optimize system voltage levels, reduce system losses, manage reactive power supply and implement conservation voltage reduction. OSI says the project eventually will span 34 distribution substations and 170 distribution feeders.</p>
<p><span class="boldred">PPL Electric Utilities</span> deployed <span class="boldred">Alvarion’s</span> BreezeMAX Extreme 3650 WiMAX system as part of its smart grid communications network. <span class="boldred">Alcatel-Lucent</span> is providing a high-speed fiber-optic communication infrastructure for the project and managing end-to-end integration of the technologies. The communication network upgrade, supported by a grant from the U.S. Department of Energy, constitutes the first phase of PPL’s smart grid project, with initial coverage of some 60,000 customers over 150 square miles in the company’s Harrisburg, Penn., operating region. The project also includes deployment of a new distribution management system. Future phases might expand coverage of distribution automation to PPL’s other operating regions across central and eastern Pennsylvania.</p>
<p><span class="boldred">Kansas City Power &amp; Light (KCP&amp;L)</span> selected <span class="boldred">Siemens</span> to implement technology in its demonstration project, including the Siemens Spectrum Power distribution management system (DMS), which facilitates operations information management and security. The KCP&amp;L project includes four major components: distribution network management, distribution network automation, distributed energy resource and demand response management. It will use advanced metering infrastructure, meter data management, demonstration of time-of-use pricing and state-of-the-art customer end-use tools. In addition, hybrid electric vehicle charging, utility-scale battery storage and roof-top solar technology will provide the basis for enabling and managing renewable and sustainable energy resources within the project area.</p>
<p><span class="boldred">Cooper Power Systems</span> collaborated with <span class="boldred">Cisco</span> to incorporate Cisco’s secure IP-based smart gird technology into Cooper Power Systems’ next generation substation and distribution automation systems for electric utilities. The agreement will allow Cooper to include Cisco’s rugged routers and switches, the Cisco 2010 Connected Grid Router and the Cisco 2520 Connected Grid Switch in Cooper’s systems. Integrating this technology is expected to help utility customers reduce operating costs, support new sources of distributed energy, and increase reliability while automating and improving outage management. </p>
<h4>Metering</h4>
<p>The City of Naperville, Ill., selected <span class="boldred">Elster</span> and <span class="boldred">Tropos Networks</span> systems as part of the city’s smart grid initiative. Elster’s EnergyAxis smart grid solution and smart meters will provide advanced metering infrastructure (AMI) capabilities. Tropos’ GridCom architecture will provide the private wireless IP communications network across the distribution area, initially supporting backhaul of data collected by Elster’s EnergyAxis system. Naperville also will use combined solutions from <span class="boldred">Schneider</span> and <span class="boldred">Calico Energy Services</span> to provide load control management services. The initiative is aimed at modernizing the electric grid to improve operational efficiencies and reliability, and to provide Naperville electric customers with more information and options for choosing how they use electricity.</p>
<p><span class="boldred">Entergy New Orleans</span> selected <span class="boldred">Sensus</span> to provide its FlexNet AMI system, electric meters, in-home displays and programmable thermostats to support a home area networking pilot program partially funded by a grant from the U.S. Department of Energy. The pilot program is designed to encourage energy conservation by providing information to consumers about their electricity usage and their associated costs. For the next 24 months, starting in June, Entergy New Orleans will track and analyze the consumption behaviors of four specific customer control groups made up of qualified customers within the city of New Orleans. Customers in the first group will receive a smart meter; the second group will receive a smart meter and an in-home display that will deliver messages about electricity usage and associated costs; the third group will receive a smart meter and programmable thermostat, and will also be offered demand-response rebates; and the fourth group will have access to an Internet portal that will display near real-time information about electricity usage.</p>
<p><span class="boldred">OG&amp;E</span> deployed the <span class="boldred">Silver Spring Networks</span> CustomerIQ web portal to all customers equipped with a Silver Spring-enabled smart meter, providing access to insights about energy usage. The deployment is part of OG&amp;E’s demand-response study, now in its second year.</p>
<h4>M&amp;A</h4>
<p><span class="boldred">GE Energy Financial Services</span> and the <span class="boldred">Government of Singapore Investment Corp.</span> each acquired 24.95 percent of a 2,500 MW natural gas fired power generation portfolio owned by <span class="boldred">ArcLight Capital Partners</span>, which will retain 50.10 percent. The plants, located throughout the state of Georgia, comprise a combined cycle facility and four single-cycle peaking facilities, each less than 10 years old. All five facilities sell their output under long-term agreements and are managed by Consolidated Asset Management Services, an ArcLight affiliate. Financial details weren’t disclosed.</p>
<p><span class="boldred">OCI Enterprises</span> acquired <span class="boldred">CornerStone Power Development</span> as part of its new OCI Energy division. CornerStone Power Development, which currently has 12 projects totaling more than 130 MW in development in the United States and Ontario, Canada, will become OCI Solar Power and will be a part of the new OCI Energy division, created to further the company’s global focus on green energy. The company expects to have 700 MW under development by 2013.</p>
<p><span class="boldred">Flex Energy</span> completed its acquisition of <span class="boldred">Ingersoll Rand’s </span>energy systems business, which builds micro turbine systems and recuperators. Sail Venture Partners and RNS Capital Partners are lead investors in FlexEnergy, having participated in both a Series A and Series B offering, and are actively involved in the company at the board level.</p>
<p> </p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/generation-markets">Generation &amp; Markets</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/td-grid">T&amp;D Grid</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/finance">Finance</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/vendor-neutral">Vendor Neutral</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/a123-systems">A123 Systems</a><span class="pur_comma">, </span><a href="/tags/abb">ABB</a><span class="pur_comma">, </span><a href="/tags/aes">AES</a><span class="pur_comma">, </span><a href="/tags/aes-energy-storage">AES Energy Storage</a><span class="pur_comma">, </span><a href="/tags/aes-gener">AES Gener</a><span class="pur_comma">, </span><a href="/tags/alcatel-lucent">Alcatel-Lucent</a><span class="pur_comma">, </span><a href="/tags/alvarion">Alvarion</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/analytics">Analytics</a><span class="pur_comma">, </span><a href="/tags/angamos">Angamos</a><span class="pur_comma">, </span><a href="/tags/arclight-capital">ArcLight Capital</a><span class="pur_comma">, </span><a href="/tags/arclight-capital-partners">ArcLight Capital Partners</a><span class="pur_comma">, </span><a href="/tags/autodesk">Autodesk</a><span class="pur_comma">, </span><a href="/tags/bpl-global">BPL Global</a><span class="pur_comma">, </span><a href="/tags/bradley-p-forst">Bradley P. Forst</a><span class="pur_comma">, </span><a href="/tags/breezemax">BreezeMAX</a><span class="pur_comma">, </span><a href="/tags/calico-energy-services">Calico Energy Services</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities-commission">California Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/cimarron-solar-facility">Cimarron Solar Facility</a><span class="pur_comma">, </span><a href="/tags/cisco">Cisco</a><span class="pur_comma">, </span><a href="/tags/cmp">CMP</a><span class="pur_comma">, </span><a href="/tags/coalition-warfare-program">Coalition Warfare Program</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/communication">Communication</a><span class="pur_comma">, </span><a href="/tags/conservation">Conservation</a><span class="pur_comma">, </span><a href="/tags/conservation-services-group">Conservation Services Group</a><span class="pur_comma">, </span><a href="/tags/constellat">Constellat</a><span class="pur_comma">, </span><a href="/tags/constellation">Constellation</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/cooper-power-systems">Cooper Power Systems</a><span class="pur_comma">, </span><a href="/tags/cornerstone-power-development">CornerStone Power Development</a><span class="pur_comma">, </span><a href="/tags/cpuc">CPUC</a><span class="pur_comma">, </span><a href="/tags/cupertino-electric">Cupertino Electric</a><span class="pur_comma">, </span><a href="/tags/customeriq">CustomerIQ</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/dg">DG</a><span class="pur_comma">, </span><a href="/tags/dms">DMS</a><span class="pur_comma">, </span><a href="/tags/donald-w-reilly">Donald W. Reilly</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/electric-power-research">Electric Power Research</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute">Electric Power Research Institute</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute-epri">Electric Power Research Institute (EPRI)</a><span class="pur_comma">, </span><a href="/tags/electric-reliability-council-texas">Electric Reliability Council of Texas</a><span class="pur_comma">, </span><a href="/tags/electric-reliability-council-texas-ercot">Electric Reliability Council of Texas (ERCOT)</a><span class="pur_comma">, </span><a href="/tags/elster">Elster</a><span class="pur_comma">, </span><a href="/tags/energy-systems-network">Energy Systems Network</a><span class="pur_comma">, </span><a href="/tags/energyaxis-0">EnergyAxis</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/entergy-new-orleans">Entergy New Orleans</a><span class="pur_comma">, </span><a href="/tags/epri">EPRI</a><span class="pur_comma">, </span><a href="/tags/ercot">ERCOT</a><span class="pur_comma">, </span><a href="/tags/eric-wachsman">Eric Wachsman</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/evergreen-solar">Evergreen Solar</a><span class="pur_comma">, </span><a href="/tags/evs">EVs</a><span class="pur_comma">, </span><a href="/tags/federal-prison-industries-fpi">Federal Prison Industries (FPI)</a><span class="pur_comma">, </span><a href="/tags/first-solar">First Solar</a><span class="pur_comma">, </span><a href="/tags/flex-energy">Flex Energy</a><span class="pur_comma">, </span><a href="/tags/flexenergy">FlexEnergy</a><span class="pur_comma">, </span><a href="/tags/flexnet-ami-system">FlexNet AMI system</a><span class="pur_comma">, </span><a href="/tags/focus-electric">Focus Electric</a><span class="pur_comma">, </span><a href="/tags/ford">Ford</a><span class="pur_comma">, </span><a href="/tags/ford-motor-co">Ford Motor Co.</a><span class="pur_comma">, </span><a href="/tags/fotowatio-renewable-ventures">Fotowatio Renewable Ventures</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/ge-energy-financial">GE Energy Financial</a><span class="pur_comma">, </span><a href="/tags/ge-energy-financial-services">GE Energy Financial Services</a><span class="pur_comma">, </span><a href="/tags/george-ashton">George Ashton</a><span class="pur_comma">, </span><a href="/tags/government-singapore-investment-corp">Government of Singapore Investment Corp.</a><span class="pur_comma">, </span><a href="/tags/greenco-solutions">GreenCo Solutions</a><span class="pur_comma">, </span><a href="/tags/gridcom">GridCom</a><span class="pur_comma">, </span><a href="/tags/imperial-valley">Imperial Valley</a><span class="pur_comma">, </span><a href="/tags/ingersoll-rand">Ingersoll Rand</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/janja-lupse">Janja Lupse</a><span class="pur_comma">, </span><a href="/tags/john-curcio">John Curcio</a><span class="pur_comma">, </span><a href="/tags/maryland-clean-energy-center">Maryland Clean Energy Center</a><span class="pur_comma">, </span><a href="/tags/mesquite">Mesquite</a><span class="pur_comma">, </span><a href="/tags/mesquite-solar-1">Mesquite Solar 1</a><span class="pur_comma">, </span><a href="/tags/microsoft">Microsoft</a><span class="pur_comma">, </span><a href="/tags/midwest-iso">Midwest ISO</a><span class="pur_comma">, </span><a href="/tags/modesto-irrigation-district">Modesto Irrigation District</a><span class="pur_comma">, </span><a href="/tags/murfreesboro-solar-project">Murfreesboro Solar Project</a><span class="pur_comma">, </span><a href="/tags/myford-mobile">MyFord Mobile</a><span class="pur_comma">, </span><a href="/tags/myford-touch">MyFord Touch</a><span class="pur_comma">, </span><a href="/tags/network">Network</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/newenergy">NewEnergy</a><span class="pur_comma">, </span><a href="/tags/north-carolina-electric-membership-corp-0">North Carolina Electric Membership Corp.</a><span class="pur_comma">, </span><a href="/tags/oci-enterprises-0">OCI Enterprises</a><span class="pur_comma">, </span><a href="/tags/ocotillo-wind-energy-facility">Ocotillo Wind Energy Facility</a><span class="pur_comma">, </span><a href="/tags/open-systems-international">Open Systems International</a><span class="pur_comma">, </span><a href="/tags/open-systems-international-osi">Open Systems International (OSI)</a><span class="pur_comma">, </span><a href="/tags/ot">OT</a><span class="pur_comma">, </span><a href="/tags/pattern-energy">Pattern Energy</a><span class="pur_comma">, </span><a href="/tags/paul-aggarwal">Paul Aggarwal</a><span class="pur_comma">, </span><a href="/tags/pepco-energy-services">Pepco Energy Services</a><span class="pur_comma">, </span><a href="/tags/pete-londa">Pete Londa</a><span class="pur_comma">, </span><a href="/tags/pev">PEV</a><span class="pur_comma">, </span><a href="/tags/plug-electric-vehicles-pev">plug-in electric vehicles (PEV)</a><span class="pur_comma">, </span><a href="/tags/ppl">PPL</a><span class="pur_comma">, </span><a href="/tags/ppl-electric-utilities-0">PPL Electric Utilities</a><span class="pur_comma">, </span><a href="/tags/project-plug">Project Plug-IN</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/rec">REC</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/ronald-moe">Ronald Moe</a><span class="pur_comma">, </span><a href="/tags/sae-international">SAE International</a><span class="pur_comma">, </span><a href="/tags/saic">SAIC</a><span class="pur_comma">, </span><a href="/tags/sce">SCE</a><span class="pur_comma">, </span><a href="/tags/schneider">Schneider</a><span class="pur_comma">, </span><a href="/tags/sempra">Sempra</a><span class="pur_comma">, </span><a href="/tags/sempra-generation">Sempra Generation</a><span class="pur_comma">, </span><a href="/tags/sensus">Sensus</a><span class="pur_comma">, </span><a href="/tags/siemens">Siemens</a><span class="pur_comma">, </span><a href="/tags/siemens-spectrum-power">Siemens Spectrum Power</a><span class="pur_comma">, </span><a href="/tags/silver-spring-networks-0">Silver Spring Networks</a><span class="pur_comma">, </span><a href="/tags/singapore-investment-corp">Singapore Investment Corp.</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/southern-california-edison">Southern California Edison</a><span class="pur_comma">, </span><a href="/tags/southern-california-edison-sce">Southern California Edison (SCE)</a><span class="pur_comma">, </span><a href="/tags/southern-company">Southern Company</a><span class="pur_comma">, </span><a href="/tags/southwest-solar-technologies">Southwest Solar Technologies</a><span class="pur_comma">, </span><a href="/tags/spectrum-power">Spectrum Power</a><span class="pur_comma">, </span><a href="/tags/spinning-reserve">spinning reserve</a><span class="pur_comma">, </span><a href="/tags/springer-electric-cooperative">Springer Electric Cooperative</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/sunpower">SunPower</a><span class="pur_comma">, </span><a href="/tags/sunpower-corp">SunPower Corp.</a><span class="pur_comma">, </span><a href="/tags/suntech-power">Suntech Power</a><span class="pur_comma">, </span><a href="/tags/suntech-power-holdings">Suntech Power Holdings</a><span class="pur_comma">, </span><a href="/tags/ted-turner">Ted Turner</a><span class="pur_comma">, </span><a href="/tags/tennessee-valley-authority-0">Tennessee Valley Authority</a><span class="pur_comma">, </span><a href="/tags/think">THINK</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/trc">TRC</a><span class="pur_comma">, </span><a href="/tags/trc-companies">TRC Companies</a><span class="pur_comma">, </span><a href="/tags/tropos-networks">Tropos Networks</a><span class="pur_comma">, </span><a href="/tags/turner-renewable-energy">Turner Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/tva">TVA</a><span class="pur_comma">, </span><a href="/tags/us-department-energy">U.S. Department of Energy</a><span class="pur_comma">, </span><a href="/tags/ultracell">UltraCell</a><span class="pur_comma">, </span><a href="/tags/v2g">V2G</a><span class="pur_comma">, </span><a href="/tags/vehicle-grid-v2g">vehicle to grid (V2G)</a><span class="pur_comma">, </span><a href="/tags/verizon">Verizon</a><span class="pur_comma">, </span><a href="/tags/virtuwatt-0">VirtuWatt</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a><span class="pur_comma">, </span><a href="/tags/zbb-energy">ZBB Energy</a><span class="pur_comma">, </span><a href="/tags/zess-50">ZESS 50</a><span class="pur_comma">, </span><a href="/tags/zess-powr-pecc">ZESS POWR PECC</a><span class="pur_comma">, </span><a href="/tags/zigbee">Zigbee</a><span class="pur_comma">, </span><a href="/tags/zigbee-alliance">Zigbee Alliance</a> </div>
</div>
Tue, 01 Mar 2011 05:00:00 +0000puradmin14123 at https://www.fortnightly.comAnatomy of Sealed-Bid Auctionshttps://www.fortnightly.com/fortnightly/2009/06/anatomy-sealed-bid-auctions
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Bringing flexibility and efficiency to energy RFPs.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Joseph Cavicchi and Andrew Lemon</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Energy Risk &amp; Markets</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Joseph Cavicchi</b> (<a href="mailto:jcavicchi@compasslexecon.com">jcavicchi@compasslexecon.com</a>) is a senior vice president and <b>Andrew Lemon, Ph.D.</b> (<a href="mailto:alemon@-compasslexecon.com">alemon@-compasslexecon.com</a>) is a senior economist with Compass Lexecon. Both are based in the firm’s Cambridge, Mass., office.<b> </b></p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 2009</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/article_images/0906/images/0906-ERM-fig-1.jpg" width="1384" height="1049" alt="" /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/article_images/0906/images/0906-ERM-fig-2.jpg" width="1376" height="1032" alt="" /></div><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/article_images/0906/images/0906-ERM-table-1.jpg" width="2437" height="3486" alt="" /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/article_images/0906/images/0906-ERM-table-2.jpg" width="1365" height="437" alt="" /></div><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/article_images/0906/images/0906-ERM-table-3.jpg" width="1373" height="469" alt="" /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/article_images/0906/images/0906-ERM-table-4.jpg" width="1369" height="904" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>With the introduction of retail competition in the electricity industry, regulatory authorities in many jurisdictions are now overseeing the purchase of electricity at wholesale by electric utilities for customers that do not otherwise obtain supply from independent retailers. There are two primary ways in which, under the supervision of regulatory authorities, electric utilities purchase electricity for these non-shopping customers: through simultaneous descending clock auctions or through fairly common sealed-bid auctions, commonly known as Requests for Proposals (RFPs).</p>
<p>Descending clock auctions have received a lot of coverage in the trade press and academic literature on electricity. In comparison, sealed-bid auctions have not received as much attention. This discrepancy may be explained by the myriad approaches to purchasing wholesale electricity that entail issuing RFPs that tend to obscure the fact that RFPs simply are sealed-bid auctions.</p>
<h4>Non-Shopping Customers</h4>
<p>In states that have introduced retail competition into the electricity market, end-use customers (such as households and businesses) can purchase their power supplies from retailers that are independent of the local utility company. Many end-use customers, however, do not purchase their power from independent retailers and continue to rely on their local utility company. The regulatory authorities in these states oversee the purchase of electricity by electric utilities to supply such “non-shopping” customers<sup>1</sup> and generally require that the electric utility purchase this power through a competitive process. In most cases, utilities use sealed-bid auctions carried out through RFPs to purchase these power supplies.</p>
<p>Competitive procurements of electricity for such utilities have been reviewed in recent years.<sup>2</sup> The most common competitive procurement process is for the electric utility to solicit sealed-bid offers to provide full-requirements load-following wholesale electricity to these non-shopping customers.<sup>3</sup> The RFPs in these solicitations share some characteristics, such as clearly defining the electricity product being purchased and the rules governing the purchase, but often differ in important ways, including the structure of the sealed-bid offers and the method of determining the winning bids. However, these “auction design” details—the structure of the sealed-bid offers and the method for determining the winning bids—play a crucial role in determining the price at which wholesale power supplies will be purchased and hence the rate that non-shopping customers will pay for electricity.</p>
<p>Three auction design elements—tranche size (<i>i.e.</i>, the size of each unit of the power product being purchased), bid format, and auction clearing methodology—play a particularly important role in determining the price that these RFPs return. Sealed-bid auctions that allow for flexibility in the pricing structure can yield lower prices for electricity than other formats.</p>
<h4>Sealed-Bid Auctions</h4>
<p>Many jurisdictions use sealed-bid auctions to purchase a particular type of default electricity product referred to as full-requirements load-following power supply.<sup>4</sup> Take for example, sealed-bid auctions for full-requirements load-following power supply carried out by 10 utilities in seven states where retail competition has been introduced <i>(see Table 1)</i>. In surveying these auctions, the details regarding the quantity of peak load being purchased, the bid format and offer pricing structures, and the auction-clearing methodology appear to be particularly important for understanding how these processes work.<sup>5</sup></p>
<p>• <b>Tranche Size:</b> Full-requirements load-following products are purchased in discrete units called tranches. A tranche is a percentage of hourly load for a given grouping of non-shopping customers established by the electric utility.<sup>6</sup> Tranches, as measured by the estimated amount of peak load that they represent, tend to be around 50 MW in size,<sup>7</sup><i>(see Table 1)</i>. However, in some instances tranche sizes are considerably larger. For example, NSTAR (in Massachusetts), Central Maine Power, and Connecticut Light &amp; Power have tranche sizes that are estimated to exceed 100 MW.</p>
<p>Tranche size has important implications for the competitiveness of sealed-bid auctions and the prices that they return. Using relatively small tranche sizes can provide incentives for smaller suppliers to compete and often results in utilities obtaining supplies from more than a single supplier in any given solicitation. On the other hand, larger tranche sizes arguably can lower transaction costs as fewer suppliers ultimately are needed to meet customer loads. It’s difficult to determine with certainty the impact of tranche size on an auction’s competitiveness, given that only limited information on the competitiveness of these auctions is publicly released. However, where such auction details are reported, some anecdotal evidence suggests smaller tranche sizes seem correlated with more bidders. For example, Pepco Maryland has tranche sizes around 50 MW and its recent solicitations have had between seven and twelve bidders, while Connecticut Light &amp; Power has tranche sizes around 400 MW and its recent solicitations have had between four and eight bidders.<sup>8 </sup>Thus, smaller tranche sizes may encourage greater supply-side competition.</p>
<p>• <b>Bid Format and Offer Pricing Structure:</b> The format of bids being submitted in a sealed-bid auction dictates the pricing offered by suppliers for the products and terms sought by the utilities. Bidders typically input the details of their offers into a pre-formatted Excel spreadsheet that defines the number of tranches, contract duration, and pricing associated with their bids. While bid formats ostensibly are comparable across auctions, offer pricing structures can vary considerably.</p>
<p>An auction’s bid format can be as simple as requesting a single price per tranche that applies to a particular customer grouping for the entire term of the contract, or as complex as requesting several prices per tranche that apply to different customer rate schedules (<i>e.g.</i>, within a customer grouping) and vary based on time of day and time of year. Examples of the simple bid formats can be found in the solicitations by the Maine PUC, Delaware’s Delmarva Power &amp; Light, and PPL Electric. These solicitations request a fixed price for a given term for a particular group of customers; the fixed price that wins the sealed-bid auction forms the basis of the customers’ rates.<sup>9</sup></p>
<p>Bid formats that request more refined offer pricing do so in two ways. First, prices can be requested for more specific time periods, such as on a monthly basis, for customer groupings. For example, Connecticut Light &amp; Power, United Illuminating, and NSTAR each request pricing on a monthly basis. Connecticut Light &amp; Power and United Illuminating go further and request that a bid’s prices be broken down into on- and off-peak periods. Second, prices can be requested for specific customer rate schedules within a customer grouping and further broken down by the actual diurnal time of use. For example, the utilities serving Maryland and District of Columbia use this type of pricing format. Specifically, these utilities request prices for a particular customer grouping (e.g, residential, small commercial and industrial), but within the grouping they solicit prices by rate schedule. Depending upon the rate schedule itself, pricing can be broken down by season (e.g, summer and non-summer), as well as time of day (<i>e.g.</i>, peak, intermediate, and off-peak). Often the more refined prices in the winning bids for these solicitations can be used directly in customer rate schedules. However, the bid formats’ spreadsheets typically take more refined pricing and reduce it to a single price that then can be used to determine the winning bids.</p>
<p>Many sealed-bid auctions use bid formats that require bidders to make offers for a single tranche in each submitted bid form. If a bidder wants to make offers on multiple tranches, the bidder must submit a separate bid spreadsheet for each offer. Utilities in Connecticut use this type of bid format. Other bid formats allow bidders to make offers for multiple tranches in a single submitted bid spreadsheet. For example, the utilities in Maryland and the District of Columbia, as well as PPL Electric, use bid formats that provide for multi-tranche offers in a single bid spreadsheet.</p>
<p>In some limited instances, bid formats also can allow bidders to elect whether or not they’ll manage the costs associated with congestion. For example, Connecticut Light &amp; Power and United Illuminating allow bidders to decide whether their offer pricing places congestion risk with the bidder or with the utility’s customers.<sup>10</sup> NSTAR also allows bidders to submit offers that will place the risk of wholesale market charges associated with reliability costs on NSTAR’s customers as opposed to paying suppliers to manage this risk. Bid formats are designed to take into account these preferences of bidders separate from their offer pricing structure.</p>
<p>Although bid formats often appear similar (even though offer pricing may be more or less refined), subtle differences can affect the offers that suppliers submit. The utilities in Maryland and the District of Columbia request that a bidder provide a price per MWh and the number of tranches the bidder is willing to supply. The utility can take any number of tranches up to the number indicated by the bidder at the single price the bidder identifies. Here the bidder is unable to condition the utility’s acceptance of the bid on taking supply of all the tranches indicated. For example, suppose a bidder bids to supply three tranches at $85 per MWh; in this case, the utility can take one, two, or three tranches from this bidder at $85 per MWh.</p>
<p>In contrast, PPL Electric and United Illuminating allow bidders to make multi-tranche offers in which there’s some ability for the bidder to make the provision of one tranche contingent on the utility accepting other tranches.<sup>11</sup> In the case of PPL Electric, bidders are required to submit an offer schedule that indicates the prices and number of tranches they are willing to supply. The offer schedule indicates separate prices for each different number of tranches the bidder offers to supply. Bidders offering more than one tranche must provide separate prices for each number of tranches (from a single tranche to the total number of tranches that the bidder is willing to provide). For example, a bidder offering a maximum of seven tranches must provide separate prices for supplying one, two, three, four, five, and six as well as seven tranches. In the case of United Illuminating, bidders can condition the acceptance of an offer for a particular tranche on the acceptance of different tranches. For example, a bidder can provide different prices for a given tranche depending on whether the utility also purchases a separate indicated tranche or tranches. That is, tranches can be offered separately at individual prices or offered at different prices where the prices are only valid if a given tranche is purchased with another particular tranche.</p>
<p>One variation on sealed-bid auctions that allows bidders to condition the provision of one tranche on the acceptance of other tranches can be found in Connecticut Light &amp; Power’s auction design. Connecticut Light &amp; Power allows bidders to enter bids for tranches and specify the contract terms the bidders would like the utility to consider.<sup>12</sup> For example, if Connecticut Light &amp; Power is evaluating offers for a six-month term (<i>e.g.</i>, the second half of 2008), and three future one-year terms (<i>e.g.</i>, 2009, 2010, and 2011), the utility allows bidders to make offers for any combination of these terms on a per-tranche basis through the submission of separate offers. This structure allows bidders to link the prices for a given tranche across the various time periods. However, this conditioning does not link across offers for different tranches.</p>
<p>Auction designs that allow bidders to condition their offers provide pricing flexibility for bidders. Utilities can benefit from this flexibility because it provides them with additional pricing information and can improve the efficiency of the auction’s results.</p>
<p>• <b>Auction Clearing Methodology</b>: The methods of determining the winning bids, and thus the resulting prices, in these sealed-bid auctions vary considerably. Auction-clearing methodologies range from a simple process of finding the lowest price per tranche to an evaluation that takes into account price and non-price terms. In some instances, the auction clearing methodology is very transparent and easy to understand, while in other instances there’s a degree of judgment exercised in selecting the winning bids.</p>
<p>Generally, the auction clearing methodology focuses on using the prices that bidders offer (via confidential transmission of bid sheets, i.e., bids on Excel spreadsheets, to the auctioneer at a pre-specified time) as the primary input for determining winning bidders. Bidders typically are required to pre-qualify in order to submit their bids. Thus, the primary task of the auctioneer is to assemble the bidders’ offers into a format where they easily can be evaluated. In all of these sealed-bid auctions, the bid sheets appear to be structured to facilitate the evaluation of offers and “clear the market.”</p>
<p>In instances where the bid format allows (or requires) prices to be submitted with seasonal and daily variation by customer grouping or rate schedule, the bid sheets are designed to take these prices and convert them into a single price per tranche. Converting prices typically requires the use of various weighting factors that are based on projections of the amount of electrical energy that will be supplied to each customer grouping.<sup>13</sup> Once bids have been converted into single prices per tranche (or tranches) the auction winners can be identified.</p>
<p>Determining the winning bids in these sealed-bid auctions depends on the way the bids are formatted. The utilities in Washington, D.C., and Maryland use a straightforward methodology in which the prices that bidders have offered are ranked from lowest to highest. The winning bids are the lowest-priced bids necessary to provide the supply being solicited. Because these utilities use sealed-bid auctions that specify that bidders must be willing to sell any whole number of tranches up to the total number offered at the single price the bidder offers, the utilities can buy, for example, two tranches of a four-tranche offer, and acquire the exact number of tranches being solicited.<sup>14</sup> In other auctions the analysis necessary to clear the market is not so straightforward.</p>
<p>When bid formats allow for bidders to condition their offers, the auction clearing methodology can become more complicated. For example, Connecticut Light &amp; Power and United Illuminating use bid formats in which bidders can submit offers with, and without, bearing congestion costs. This bid format gives the bidder flexibility, but requires that the auctioneer evaluate more information. In addition, determining the winning bids becomes more complex because these utilities solicit offers for several products with overlapping terms and subsequently decide which products to purchase at any particular time. In the case of United Illuminating, bidders can condition an offer for one tranche of a product with a particular term on the purchase of another offer for a separate tranche of a different product with a different term. Such flexibility creates more dimensions along which the auctioneer must evaluate bids. When the bid format allows bidders to condition their offers, the auction clearing methodology must consider all the possible combinations of offers that can be purchased to meet the utility’s needs to determine what combination best suits the utility.</p>
<p>The auction clearing methodology can involve a certain level of subjectivity. For example, Connecticut Light &amp; Power and United Illuminating reserve the right not to purchase all of the supplies they solicit. Thus, when determining the least costly offers, the companies also decide how much supply to purchase. Deciding how much supply to purchase within the context of the sealed-bid auction allows the utilities to determine whether the current solicitation is the best time to make the purchase or whether purchasing in the future would be more beneficial. As a result of the auction clearing methodology that these utilities employ, the decision-making process surrounding the procurement of power is less transparent to the public.</p>
<p>Other auction clearing methodologies more explicitly incorporate non-price criteria. For example, the Maine PUC asks potential bidders to first submit indicative bids that provide the commission with initial information as to bidder’s pricing and potential exceptions to contractual terms and conditions. The Maine PUC then will meet with bidders and negotiate non-price terms and conditions with the goal of learning whether particular terms and conditions push up prices.<sup>15</sup> The Maine PUC then may adjust particular terms and conditions after these negotiations. A short time thereafter, bidders submit final bids.</p>
<p>To determine the winning bids, the Maine PUC evaluates which offers provide the greatest value to customers considering the prices that bidders offered. However, this process can be complicated by the fact that bidders are allowed concomitantly to offer to purchase power entitlements from the very utilities they are offering to supply. Thus, in Maine, identifying the winning bidders may require considering the linkage between the offer to supply power and the offer to purchase power entitlements. The Maine PUC provides procurement reports that provide some insight into how this process works.</p>
<h4>Auction Efficiency</h4>
<p>The pricing structure that bidders can offer is dictated by the design of each jurisdiction’s sealed-bid auction. In most jurisdictions, the pricing structure prevents suppliers from making conditional bids. A conditional bid is “a bid that is valid only if a specified set of requirements are met, such as package, minimum delivery, or payment require-ment.”<sup>16</sup> Pricing structures that allow suppliers to make conditional bids can increase the efficiency of the auction.</p>
<p>The efficiency that can be gained by allowing bidders to make conditional bids can be illustrated by comparing the pricing structure under RFPs used by utilities in Maryland with the price structure under PPL Electric’s RFP.<sup>17</sup> In Maryland, bidders are asked to submit the maximum number of tranches the bidder is willing to provide and a single price per tranche at which it’s willing provide any number of tranches up to that maximum. For example, a bidder in Maryland might bid to provide a maximum of five tranches for $85 per MWh. The electric utility can purchase any number of tranches—up to five tranches—from this bidder at a price of $85 per MWh. Under the Maryland RFPs, the bidder is unable to condition the price at which it’s willing to provide the first tranche, second tranche, <i>etc. </i></p>
<p>Thus, with Maryland RFPs, the bidder in this example could issue five separate bids for one tranche each. In this case, the electric utility incrementally would pay for each tranche that it wants to purchase starting with the least expensive. If the first tranche is more costly for the bidder to provide than the second tranche,<sup>18</sup> there’s no way for the bidder to reflect this cost difference in its bid. Thus, such a bidder is forced to increase the price at which it’s willing to provide the second tranche above its marginal cost to be sure to cover its marginal cost of supplying the first tranche <i>(see Figure 1).</i><sup>19</sup> Basic economics tells us that pricing above marginal cost can lead to inefficiencies.<sup>20</sup></p>
<p>In contrast to the utilities in Maryland, PPL Electric’s RFP explicitly allows a bidder to submit a bid that is conditional on the number of tranches that the bidder is awarded. In PPL Electric’s RFP, bidders are asked to submit prices for each total number of tranches they’re willing to provide. For example, a supplier in this RFP might be willing to provide a maximum of five tranches. This bidder would have to provide five separate prices, <i>i.e.</i>, a price for providing one tranche, two tranches, three tranches, four tranches, and five tranches. In this manner, the bidder’s bid is conditional on the number of tranches it’s awarded. If the first tranche is more costly for the bidder to provide than the second tranche, the bidder can reflect this cost difference in its bid by lowering the price of providing two tranches relative to one tranche. Such a bidder can offer prices at which it’s willing to provide each total number of tranches equal to its marginal cost <i>(see Figure 2)</i>.</p>
<p>The type of conditional bidding allowed under PPL Electric’s RFP clearly can increase efficiency compared to Maryland RFPs, but it requires a different auction clearing mechanism. With conditional bidding, determining the winning set of bids becomes more complex and, thus, identifying the winning bidders requires the auction manager to use a different solution technique. For the Maryland utilities, the process of identifying the winning bids is rather simple and straightforward. Bids are ranked from least expensive to most expensive. The utility purchases the least expensive tranches that fulfill the supply it was seeking to obtain.</p>
<p>For example, if the utility seeks to buy a total of five tranches, it purchases the five least expensive tranches <i>(see Table 2)</i>. For PPL Electric, the process of identifying the winning bids requires considering which combination of bids yields the desired number of tranches at the least cost. This process requires more computation than the simple ranking of bids necessary in Maryland because the cost of each combination must be assessed. For example, if the utility seeks to buy a total of five tranches, it must consider all combinations of five tranches that can be obtained from the available bidders’ bids in order to determine the unique set of low-cost suppliers <i>(see Table 3)</i>.</p>
<p>Conditional bidding gives rise to the need for a different solution technique like that used in PPL Electric’s RFP. Suppose the electric utility wants to buy a total of 10 tranches and that each bidder is willing to provide a maximum of five tranches. Under the pricing structure in Maryland’s RFP, the utility only needs to rank each bidder’s bid from least expensive to most expensive and identify the two least-costly bidders. The complexity of this problem increases almost linearly with the number of bidders <i>(see Table 4)</i>. Under the pricing structure in PPL Electric’s RFP, the utility needs to consider all combinations of bids that yield 10 tranches and identify the least-costly combination. The complexity of this problem increases much faster with the number of bidders <i>(see Table 4). </i></p>
<p>It might appear that the increase in complexity that accompanies conditional bidding makes such pricing structures in electricity auctions unrealistic. However, this is not the case. While auctions with conditional bidding cannot necessarily be solved using a spreadsheet program like Microsoft Excel, computer software quickly can solve the combinatorial mathematics presented by conditional bidding. For example, determining the winning bidders needed to obtain 10 tranches when 15 bidders each bid to provide a maximum of eight tranches requires assessing more than 3 million combinations; the most basic computer algorithms can identify the least costly combination of bids in about 45 seconds on a common office computer. Advances in computational economics have made it possible to solve much more complicated pricing structures associated with conditional bidding.</p>
<p>In addition, in recent years it has become more common for auctions to be carried out over the internet. Electricity supplies are being procured using internet-based platforms in some states, and many large businesses use such systems as a means of procuring various goods and services. The submission and analysis of offers can be simplified using these internet-based systems. Moreover, the more complex computational challenges easily can be evaluated using computer systems specifically designed to process auction information.</p>
<h4>Auction Improvements</h4>
<p>The sealed-bid auctions used to procure electricity to supply non-shopping customers range from the simple to the more complex. However, many of these auctions use structures that constrain types of offers that bidders can make. Appropriately finding ways to make these auctions more flexible, using advances in computational economics, will yield better pricing outcomes for ratepayers. In the process, regulators also should consider implementing these auctions through internet-based platforms. It’s not difficult to improve these existing auctions by focusing on the tranche size, bid format and offer pricing structure, and the auction clearing methodology.</p>
<p> </p>
<h4>Endnotes:</h4>
<p>1. There are two notable exceptions: 1) In Maine, the Maine Public Utilities Commission (ME PUC) issues RFPs for wholesale power supply and selects suppliers as opposed to the two local utilities, Bangor Hydroelectric (BHE) and Central Maine Power (CMP), soliciting wholesale power supplies with oversight from ME PUC; and, 2) In Massachusetts, the Department of Public Utilities does not oversee wholesale power procurements by utilities if they are purchasing power products with a term of one year or less.</p>
<p>2. <i>See</i>, for example, Tierney, Susan F., and Todd Schatzki, <i>Competitive Procurement of Retail Electricity Supply: Recent Trends in State Policies and Utility Practices</i>, for the National Association of Regulatory Utility Commissioners, July 2008; and LaCasse, Chantale, and Thomas Wininger, “Maryland versus New Jersey: Is There a ‘Best’ Competitive Bid Process?,” <i>The Electricity Journal</i>, Volume 20, Issue 3, April 2007. These researchers suggest that the most important consideration for ensuring a competitive procurement is that the process be fair and transparent. The Federal Energy Regulatory Commission has also established similar guidelines for conducting successful competitive power procurements with the focus on preventing affiliate abuse [<i>see</i>, generally, <i>Allegheny Energy Supply Company, LLC, </i>108 FERC ¶ 61,082 (2004)].</p>
<p>3. Numerous fair and transparent RFPs successfully have been carried out over the last several years. <i>See, e.g.</i>, approvals of procurements issued by regulatory agencies in Connecticut, Maryland, Delaware, and Pennsylvania, at: <a href="http://depsc.delaware.gov/orders/7405.pdf" target="_blank"><i>http://depsc.delaware.gov/orders/7405.pdf</i></a> (accessed Dec. 11, 2008); <a href="http://webapp.psc.state.md.us/Intranet/Casenum/CaseAction_new.cfm?CaseNumber=9064" target="_blank"><i>http://webapp.psc.state.md.us/Intranet/Casenum/CaseAction_new.cfm?CaseNumber=9064 </i></a>(accessed Dec. 12, 2008); <a href="http://www.dpuc.state.ct.us/dockcurr.nsf/f7de85eded62752a8525655d005653b8/e3a3481f152dc47a852573cc007093a2?OpenDocument" target="_blank"><i>http://www.dpuc.state.ct.us/dockcurr.nsf/f7de85eded62752a8525655d005653b8/e3a3481f152dc47a852573cc007093a2?OpenDocument </i></a>(accessed Dec.12, 2008).</p>
<p>4. Full-requirements load-following power refers to a wholesale electricity product where the buyer pays a single fixed price in exchange for the seller’s commitment to obtain all of the services necessary to meet the utility’s customer loads. In this regard, “full-requirements” typically refers to energy, capacity, ancillary services, congestion management, transmission and distribution losses, risk management, renewable energy credits, and any other services necessary to completely supply the utility’s customer load; “load-following” refers to the seller’s commitment to supply a specified percentage (<i>i.e.,</i> “tranche”) of the utility’s hourly load.</p>
<p>5. The contract terms for the solicitations shown in Table 1 vary from three months to three years.</p>
<p>6. Non-shopping customers often are grouped by the classification of their load (<i>e.g.</i>, residential, or small, medium or large commercial and industrial). In many instances, utilities can use rate schedules as a means of creating these customer groupings. In other instances, customers can be grouped by peak demand level; however, this may result in customers on the same rate schedules being assigned to different groupings for the purposes of establishing energy supply rates.</p>
<p>7. The tranche size reported in Table 1 is the approximate amount of supply that a supplier will have to provide at the time of peak load. However, suppliers ultimately are responsible for a percentage of load such that the tranche quantity varies hour to hour based on actual hourly customer load. Suppliers can estimate hour-to-hour load based on historical data and expected future market conditions.</p>
<p>8. Pepco Holdings Inc., Maryland SOS Public Disclosure of Information Web site (accessed Dec. 12, 2008).</p>
<p>9. Given that solicitations are laddered over time to prevent purchasing all of the power needed to supply customers at any one time, customer rates typically are based on the average of the prices in the winning bids across several different solicitations. Where the utilities have different prices for different rate schedules, utilities typically employ specific formulas to determine the rates from the average of the winning prices across these solicitations.</p>
<p>10. United Illuminating and Connecticut Light &amp; Power also allow to varying degrees the ability for suppliers to make “contingent” offers so that suppliers can submit linked offers and also limit their sales to a specified maximum total quantity.</p>
<p>11. The Maine PUC allows bidders to link the sale of wholesale power to a utility to a same-term purchase of power supply from the utility (with Maine PUC oversight). In Maine, utilities have historical entitlements to power supplies (<i>i.e.,</i> non-utility generators). These supplies are sold at the same time wholesale suppliers are solicited. The prices for both purchases and sales can be linked by the bidder. However, this approach is not the same as allowing a bidder to condition acceptance of one tranche of its supply offer on the utility’s purchase of other tranches.</p>
<p>12. United Illuminating’s offering structure also allows for linking of different term offers; however, each unique product term is defined as a separate tranche.</p>
<p>13. Utilities in Connecticut, Washington, D.C., and Maryland convert these prices on the bid sheet so that bidders can see the price per tranche they are offering when the bid sheet is completed. In contrast, utilities in Massachusetts do not provide the weighting calculation that is used by bidders.</p>
<p>14. There can be situations in these auctions where offers are rejected by the utility commission if the prices are above a level considered reasonable.</p>
<p>15. For example, there could be a particular aspect of the credit requirements or default provisions of the proposed contract that a supplier may indicate are unnecessarily costly.</p>
<p>16. <i> Combinatorial Auctions,</i> 2006, edited by Peter Cramton, Yoav Shoham, and Richard Steinberg, at 616.</p>
<p>17. A similar comparison can be made to United Illuminating’s auction structure instead of PPL Electric’s format.</p>
<p>18. Such cost structures can arise from economies of scale and scope in production and distribution technologies, as well as the supplier’s approach to managing wholesale supply and delivery.</p>
<p>19. Given the bid format, the price of the subsequent tranches cannot decline, but either remain the same or increase.</p>
<p>20. <i>See, e.g.</i>, Baumol, William J., and Alan S. Blinder, <i>Economics: Principles and Policy</i>, 1988, at 605-606.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/distributed-generation">Distributed Generation &amp; Microgrids</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/energy-risk-markets">Energy Risk &amp; Markets</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/article_images/0906/images/0906-cvr.jpg" width="1121" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
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<a href="/tags/allegheny-energy">Allegheny Energy</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/cmp">CMP</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/delmarva-power">Delmarva Power</a><span class="pur_comma">, </span><a href="/tags/economics">Economics</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/hydro">Hydro</a><span class="pur_comma">, </span><a href="/tags/hydroelectric">Hydroelectric</a><span class="pur_comma">, </span><a href="/tags/maine-public-utilities-commission">Maine Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/maine-puc">Maine PUC</a><span class="pur_comma">, </span><a href="/tags/microsoft">Microsoft</a><span class="pur_comma">, </span><a href="/tags/national-association-regulatory-utility-commissioners">National Association of Regulatory Utility Commissioners</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/pepco-holdings">Pepco Holdings</a><span class="pur_comma">, </span><a href="/tags/ppl">PPL</a> </div>
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Mon, 01 Jun 2009 04:00:00 +0000puradmin13704 at https://www.fortnightly.comFederalizing the Gridhttps://www.fortnightly.com/fortnightly/2009/04/federalizing-grid
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Renewable mandates will shift power to FERC but pose problems for RTOs.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Bruce W. Radford</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Commission Watch</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Bruce W. Radford</b> is publisher of <i>Public Utilities Fortnightly</i>.<b> </b></p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - April 2009</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/article_images/0904/images/0904-CW-fig1.jpg" width="1361" height="920" alt="" /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/article_images/0904/images/0904-CW-fig2.jpg" width="1356" height="921" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>A recent survey conducted by the U.S Office of Personnel Management and reported by the <i>Washington Post</i> on March 13 ranked the Federal Energy Regulatory Commission as eighth best of some 37 federal agencies in terms “talent,” and third in “leadership and knowledge.”</p>
<p>Those skills were never so evident as when acting FERC chairman Jon Wellinghoff trooped up to Capitol Hill on March 12, to testify before the Senate Committee on Energy and Natural Resources regarding a new legislative proposal, known as the Clean Renewable Energy and Economic Development Act (S. 539), introduced March 5 by Senator Harry Reid (D- Nev.).</p>
<p>Wellinghoff gave a boffo performance on Capitol Hill, revealing himself to be an unabashed promoter both of renewable energy and of FERC’s ability to make it a reality. He more than held his own in debating with the committee’s more conservative Republican senators.</p>
<p>On the bill’s fundamental purpose—to expand the electric transmission network to boost development of wind, solar, and geothermal power—Wellinghoff assured the Senate committee that yes, his agency is perfectly capable, if called upon, to take over from the states and the regional system operators virtually all essential tasks of orchestrating construction of a massive green-grid expansion, if the new Congress, as expected, enacts a 20-percent federal renewable portfolio standard (RPS).</p>
<p>Among other points, the bill asks the industry to identify geographic areas across the country that contain outstanding potential for renewable energy development, borrowing on the CREZ concept (“Competitive Renewable Energy Zones”) first adopted in Texas. The bill then would set up two super-regional entities —one each for the Eastern and Western Interconnections, to be funded by a new federal rate surcharge.</p>
<p>These two interconnection-wide entities would conduct all planning, siting, and cost allocation required for a complete green makeover of the nation’s transmission grid to tap renewable energy from the Great Plains and Intermountain West and transport it to more populous consuming areas.</p>
<p>Though state agencies could “consult” in the process, FERC would step in and take over if needed—a prospect that seems increasingly likely, given what we have seen lately with green-grid project proposals.</p>
<p>Back at the committee hearing, a few Senators inquired about the need for renewable energy versus more traditional nuclear and large-scale, fossil-fired central-station technology. On this topic Wellinghoff came loaded for bear, well prepared by his staff.</p>
<p>He did not flinch one iota, for example, when Sen. John McCain (R-Ariz.) asked him point blank whether nuclear power should qualify under S. 539 as “renewable.” “No,” was Wellinghoff’s one-word answer.</p>
<p>“Remarkable,” replied the dour-faced McCain, who said nothing more.</p>
<p>Nor did he blink when Tennessee’s Bob Corker had sought to ruffle FERC’s sails by asking how much redundancy was required under a 20-percent federal RPS to make up for wind’s intermittency. Wellinghoff clearly embarrassed the Republican when he quickly shot back that no, wind actually requires less redundancy, due to its wider dispersion of smaller units. It is the larger-capacity Palo Verde nuclear plant in Arizona, Wellinghoff noted, that by contrast stands as the largest single contingency in the Western Interconnection, requiring the greatest degree of redundant investment.</p>
<p>That’s what you get with impressive talent and leadership.</p>
<p>So it fell to the ranking minority member, Sen. Lisa Murkowski (R-Alaska), to redeem the Republican cause. Toward the end of the hearing, she finally extracted a concession of sorts from Graham Edwards, acting president and CEO, Midwest Independent Transmission System Operator, Inc. (MISO). Murkowski asked him about the study released February 9 by the Joint Coordinated System Plan (JCSP), representing MISO, PJM, TVA, and other regional planning agencies <i>(see Figure 1)</i>, which had reported that $80 billion was needed for new grid lines in just the Eastern Interconnection to accommodate a 20-percent federal RPS mandate. Edwards responded that for analysis purposes the JCSP planners had assigned only a 15-percent capacity factor to wind resources, recognizing its intermittency.</p>
<h4>The Audacity of Wind</h4>
<p>To better understand the problem, consider FERC’s recent experience with a handful of individual transmission line cases—covering a wide range of projects featuring both DC and AC lines, rate-based and at-risk merchant investment vehicles, and geographic areas both within and without established RTO zones:</p>
<p>• <b>Green Power Express</b>. Sponsor: ITC. 12,000 MWs AC capacity. 3,000+ miles 765 kV. Dakotas to Chicago, Twin cities and SE Wisc. Regions: MISO, PJM, MAPP. $10 billion to $12 billion. Request pending for rate incentives.<i> (FERC Dkt. ER09-681</i>. See, <i><a href="http://www.thegreenpowerexpress.com" target="_blank">www.thegreenpowerexpress.com</a>.)</i></p>
<p>• <b>Chinook/Zephyr</b>. Twin merchant projects, each sponsored by TransCanada. (A) Chinook: 3,000 MWs DC, 1,000 miles 500-kV, Montana to Nevada. (B) Zephyr: 3,000 MWs DC, 1,100 miles 500 kV, Wyo. to Nev. Authority granted for each to award 50 percent of line capacities to a private wind developer and “anchor tenant,” outside of any open season or OASIS solicitation. <i>(Dkt. Nos. ER09-432, ER09-433, Feb. 19, 2009, 126 FERC ¶61,134</i>. See, <i><a href="http://www.transcanada.com/company/zephyr _chinook.html" target="_blank">www.transcanada.com/company/zephyr _chinook.html</a>)</i>.</p>
<p>• <b>Tallgrass/Prairie Wind</b>. Two projects, sponsored by Electric Transmission America (AEP &amp; MidAmerican Energy), with co-sponsors OGE Energy (Tallgrass) and Westar (Prairie Wind). TG: 170 miles 765 kV in Oklahoma; PW: 230 miles 765 kV, in Kansas. Rate incentives granted on condition of project being approved by planning agencies. <i>(Dkt. Nos. ER09-35, ER09-36, Dec. 2, 2008, 125 FERC ¶61248</i>. See, <a href="http://www.tallgrasstransmission.com" target="_blank"><i>www.tallgrasstransmission.com</i></a>, and <a href="http://www.prairiewindtransmission.com" target="_blank"><i>www.prairiewindtransmission.com</i></a>.<i>) </i></p>
<p>• <b>Quebec-New Hampshire</b>. A single line sponsored by Hydro-Quebec, NStar, and NE Utils. 1,200 MW DC. Length unknown. Quebec to southern New Hampshire. ISO New England Region. Seeks to award access rights to line owners, without open season and/or OASIS offer, and to sell transported energy in bilateral deal outside of regional market, in exchange for participant-funding by sponsors. The request is pending, but so far has drawn vociferous opposition from virtually all power industry sectors. <i>(FERC Docket No. EL09-20.) </i></p>
<p>• <b>Maine Power Connection</b>. Central Maine Power, Maine Public Service. 200 miles 345 kV. ISO-NE region. Would interconnect proposed wind projects in N. Maine with rest of New England. Order granting rate incentives granted. <i>(Docket EL08-77, Nov. 17, 2008, 125 FERC ¶61,182.)</i> Application for state certificate of need dismissed without prejudice by state regulators. <i>(Maine P.U.C. Docket No. 2008-256, Feb. 5, 2009.)</i> Project apparently is now on hold. (See, <a href="http://www.mainepowerconnection.com" target="_blank"><i>www.mainepowerconnection.com</i></a>.)</p>
<p>In New England, RTO rules allow socialization of grid-expansion costs among all member utilities across the RTO footprint, if the project will qualify as a “METU” (Market Efficiency Transmission Upgrade) that reduces the delivered price of retail electricity. But importing emission-free hydropower from Canada does little to cut power bills in New England, as the wholesale price is set by gas-fired generation, which clears on the margin in the ISO-NE regional market. State regulators have questioned why New England ratepayers should pay for green-grid expansions, like the Maine Power Connection project, if they (the ratepayers) get no benefit on the bottom line. (For more see the prior column, “<a href="http://www.fortnightly.com/fortnightly/2008/10/transmission-bubbling">Transmission is Bubbling</a>,” <i>Fortnightly</i>, October 2008.)</p>
<p>The Quebec/New Hampshire project sponsors have learned from the Maine experience. They seek to fund their line themselves, without the region-wide cost contribution that has proved unacceptable to New England regulators. But as a <i>quid pro quo</i>, they seek to bundle up the energy product and “take it private”—excluding the energy from trading in the regional spot market, and reserving the green-energy benefits for themselves—a move that would seem to violate FERC’s open-access policies, and create an impermissible wholesale bundling of transmission and energy services.</p>
<p>Tallgrass and Prairie Wind illustrate how FERC’s policy under Order 679 permits project sponsors to apply for, and receive, generous rate incentives even if the project has not yet won certification from the applicable regional or state-run procedural body for planning, vetting and approving grid projects, as long as FERC conditions the grant of incentives on such future vetting and approval.</p>
<p>That policy encourages multiple and potentially duplicative grid projects to seek incentives from FERC. Witness the example that some call “Bloody Kansas,” whereby Joseph Welch, chairman, president and CEO of ITC Holdings, was driven to post an open letter to recite how his company had worked for months with state and local officials on a green-grid expansion to bring wind power to Kansas ratepayers, only to see a competing local utility jump in after the fact, seeking in effect to co-opt the project as its own. (See, Joseph L. Welch, “To the Governor, the Legislature, and the People of the Great State of Kansas,” Jan. 9, 2009, at: <a href="http://www.itcgreatplains.com/pdfs/letterOfImportance.pdf" target="_blank">w<i>ww.itcgreatplains.com/pdfs/letterOfImportance.pdf</i></a>.)</p>
<p>TransCanada, the lead sponsor of the proposed Chinook and Zephyr merchant transmission lines, has fallen back on experience in the natural gas industry, where new pipeline developers conduct an open season to gauge interest and attract equity investors. FERC now has accepted TransCanada’s proposal to carve out a 50-percent capacity interest on each line for private use by a wind-project developer serving as an equity investor and “anchor tenant.”</p>
<p>Finally, the Green Power Express (GPX) represents an entirely new breed of project. As noted in last month’s column, “<a href="http://www.fortnightly.com/fortnightly/2009/03/titans-transmission">Titans of Transmission</a>,” GPX sponsor ITC and its leader Joseph Welch seized on President Obama’s campaign call to bring wind from the Dakotas to Chicago, to the tune of a monster grid construction plan thought to cost anywhere between $10 billion and $12 billion.</p>
<p>But project opponents call the GPX plan premature, since it has not been vetted by a grid-planning process in any affected region, and thus might never even win approval. Moreover, with GPX not fitting the mold of the typical grid addition, opponents chafe that ITC and Welch have asked FERC for recovery of startup and development costs, plus rate-of-return incentives and rate-base formula rates under applicable RTO tariffs, but have asked FERC also to fashion an entirely new super-regional planning procedure for the project (akin to the Reid proposal), which would bypass planning rules already in place in MISO, PJM, and MAPP, where GPX would lay down lines.</p>
<p>One project opponent finds all this too much to bear: “Here we are faced with an enormously expensive, speculative undertaking that seeks the right to recover, among other amounts, unquantified funds it has already expended in pursuit of something that might turn out to be unwise and dropped.” <i>(See, Protest of American Mun. Pwr. – Ohio, p. 2, FERC Dkt. ER09-681, filed March 2, 2009.) </i></p>
<p>Others say it is not enough that ITC has modeled its project on Obama’s campaign rhetoric. According to Montana Consumer Counsel Robert A. Nelson, GPX is “as breathtaking in its audacity as it is in its scope.”</p>
<h4>Build and They Will Come</h4>
<p>Speaking at the technical conference held at FERC on March 2 to explore the integration of renewable resources into the wholesale electric grid, PJM’s senior vice president of operations, Michael J. Kormos, echoed the arguments of ITC’s Joseph Welch, and many others, that current regional grid-planning rules that focus only on system needs, such as load growth or actual requests for generation interconnection, don’t seem to work anymore for a “Build It and They Will Come” project, such as the GPX, and others in the works as well, such as AEP’s Pioneer Project <i>(see, FERC Dkt. ER09-75)</i>, sponsored by Electric Transmission America, AEP’s joint venture with Mid-American Energy.</p>
<p>Kormos wants FERC to open a rulemaking to consider a new “third-tier metric,” beyond reliability and congestion, with inputs to reflect the public-interest value of green power.</p>
<p>He advises against a purely interconnection-wide planning regime, as proposed in the Reid bill, preferring instead to rely on regional planning at the RTOs, in coordination with each other. So does ISO New England CEO Gordon van Welie, who urged at the technical conference that any transmission planning effort for the Eastern Interconnection as a whole should follow “an iterative process where regional plans serve as the basis and are coordinated and harmonized by a federal entity.”</p>
<p>RTOs, he said, should remain “as the primary planning authority for managing the integration of renewable within their footprint.”</p>
<p>Yet when Energy and Natural Resources Committee Chairman Bingaman (D-Ariz.) asked at the Senate hearing if grid planning should be conducted on a wider footprint, such as across the entire interconnection, Wellinghoff saw no problem. “The West is doing it now,” he said, “through the Western Governor’s Initiative.”</p>
<p>Any move toward interconnection-wide planning not only erodes the turf of RTOs, but raises questions about what to do with the alphabet soup of <i>ad hoc</i> regional grid study groups that have sprung up recently, such as UMTDI (Upper Midwest Transmission Development Initiative), RGOS (MISO Regional Generation Outlet Study), and CAPX2020, shorthand for Transmission Capacity Expansion Initiative by year 2020.</p>
<p>How would these groups mesh with a new super-regional or interconnection-wide planning regime, imposed by Congress?</p>
<p>CAPX2020 group members, Great River Energy and Minnesota Power, for example, already have proposed a trio of 345-kV grid projects in the Upper Midwest as part of the group’s approved portfolio of Phase I projects, and have won a recommendation for a certificate of need from an administrative law judge at the Minnesota PUC. <i>(See, Recommended Order, Minn. PUC Dkt. E002/CN-06-1115, Feb. 27, 2009.) </i></p>
<p>These three CAPX2020 projects might well compete or overlap with GPX. Moreover, UMTDI reportedly is considering the development of offshore wind turbines in the Great Lakes, closer to load centers in Chicago, Milwaukee and the Twin Cities than the Dakotas, which could trump the GPX plan.</p>
<p>Then comes CARP, the “Cost Allocation and Regional Planning Initiative,” formed by the state PUCs that make up the Organization of MISO States. Testifying at FERC’s March 2 technical conference, Wisconsin utility commissioner and OMS President Lauren Azar reported that CARP soon would hold its fourth meeting on trying to resolve who benefits from green-power development, and how to allocate the grid-expansion costs incurred to reap those benefits.</p>
<p>As Azar explained, MISO’s current cost-sharing method, as provided for under the RECB regime (“Regional Expansion Criteria and Benefits,” pronounced “Wreck-Bee”—yes, that’s right), has proven unworkable.</p>
<p>Consider that Otter Tail Power, a small-sized utility, reportedly is faced with more than 10,500 MW in new interconnection requests for wind energy gen projects, with implications of costly transmission expansions for Otter Tail ratepayers. That prospect reportedly prompted Otter Tail’s JoAnn Thompson to raise questions about the impact of regional grid-cost allocations in a presentation she gave to MISO’s RECB Task Force on February 27. Otter Tail Power confirmed that, to preserve its options, it filed notice with MISO on Dec. 31, 2008, of its possible intention to withdraw its membership from the RTO.</p>
<h4>Searching for Certainty</h4>
<p>Otter Tail’s story reveals a fundamental truth: The difficulty lies not so much in the planning, which can be made objective and has been made mandatory by FERC in Order 890. Rather, the problem rests with the region-wide allocation of costs for all those miles of new grid—a job that by default has fallen to the RTOs, who then must find a rationale to assign those costs to transmission-owning members whose allegiance to the regional grid organization, as measured under FERC Order 2000, remains purely voluntary.</p>
<p>ITC’s Joseph Welch said as much in written comments he submitted at FERC’s March 2 technical conference, helping explain why his company’s GPX project seeks a new paradigm for planning and siting.</p>
<p>He explained that RTO market participants and stakeholders remain free to defend their own interests in RTO planning sessions, but that if the RTO should attempt to impose a solution that serves the regional interest, “the stakeholder may threaten to leave the RTO, using membership fees as leverage.”</p>
<p>This asymmetry produces an inherent conflict of interest at RTOs, Welch testified, requiring a “larger planning footprint.”</p>
<p>Welch cites MISO’s ill-fated Western Markets proposal as evidence of MISO’s susceptibility to such pressures. <i>(See, prior column, “<a href="http://www.fortnightly.com/fortnightly/2009/02/wooing-western-wind">Wooing the Western Wind</a>,” Fortnightly, Feb. 2009, and the order rejecting the plan, at FERC Dkt. ER08-637, Feb. 19, 2009, 126 FERC ¶61,139.)</i></p>
<p>Yet an even more radical view comes from ISO New England CEO van Welie, who appears to advocate nothing short of a retreat from one of FERC’s most hallowed open-access principles, the independence of the wholesale transmission sector from any participation in the energy market.</p>
<p>As van Welie testified before FERC, the New England region is now “starting to gravitate towards a model that would overcome concerns … by bundling energy and transmission costs into delivered energy price contracts.”</p>
<p>In other words, van Welie and ISO-NE are leaning toward the solution proposed by Hydro-Quebec, NStar, and Northeast Utilities for the Quebec/New Hampshire grid project that has drawn so much heated opposition from across the electric industry.</p>
<p>Even so, van Welie remains adamant that stakeholders will demand the reciprocal certainty of contracts as a price for funding the new green grid.</p>
<p>“The regional overlay plans give you a sense of what’s possible,” he concedes, “but who decides for the purpose of the model whether natural gas is $5 per MMBtu or $12? Who decides if transmission construction costs will stay the same, as estimated, or whether you will have unexpected inflation?</p>
<p>“RTOs,” he says, “are ill-positioned to take this next step.”</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/ferc">FERC</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/commission-watch">Commission Watch</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/article_images/0904/images/0904-cvr.jpg" width="1121" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
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<a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/arp">ARP</a><span class="pur_comma">, </span><a href="/tags/benefits">Benefits</a><span class="pur_comma">, </span><a href="/tags/cap">CAP</a><span class="pur_comma">, </span><a href="/tags/capx2020">CAPX2020</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/chinook">Chinook</a><span class="pur_comma">, </span><a href="/tags/citi">Citi</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/cost">Cost</a><span class="pur_comma">, </span><a href="/tags/cost-allocation">cost allocation</a><span class="pur_comma">, </span><a href="/tags/crez">CREZ</a><span class="pur_comma">, </span><a href="/tags/csp">CSP</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/eastern-interconnection">Eastern Interconnection</a><span class="pur_comma">, </span><a href="/tags/el09-20">EL09-20</a><span class="pur_comma">, </span><a href="/tags/electric-transmission">Electric Transmission</a><span class="pur_comma">, </span><a href="/tags/energy-and-natural-resources-committee">Energy and Natural Resources Committee</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/great-river-energy">Great River Energy</a><span class="pur_comma">, </span><a href="/tags/harry-reid">Harry Reid</a><span class="pur_comma">, </span><a href="/tags/hydro">Hydro</a><span class="pur_comma">, </span><a href="/tags/hydro-quebec">Hydro-Quebec</a><span class="pur_comma">, </span><a href="/tags/interconnection">Interconnection</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/iso-new-england">ISO New England</a><span class="pur_comma">, </span><a href="/tags/iso-ne">ISO-NE</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/itc">ITC</a><span class="pur_comma">, </span><a href="/tags/itc-holdings">ITC Holdings</a><span class="pur_comma">, </span><a href="/tags/jon-wellinghof">Jon Wellinghof</a><span class="pur_comma">, </span><a href="/tags/jon-wellinghoff-0">Jon Wellinghoff</a><span class="pur_comma">, </span><a href="/tags/joseph-welch">Joseph Welch</a><span class="pur_comma">, </span><a href="/tags/midamerican">MidAmerican</a><span class="pur_comma">, </span><a href="/tags/midamerican-energy">MidAmerican Energy</a><span class="pur_comma">, </span><a href="/tags/midwest-independent-transmission-system-operator">Midwest Independent Transmission System Operator</a><span class="pur_comma">, </span><a href="/tags/minnesota-power">Minnesota Power</a><span class="pur_comma">, </span><a href="/tags/miso">MISO</a><span class="pur_comma">, </span><a href="/tags/northeast-utilities">Northeast Utilities</a><span class="pur_comma">, </span><a href="/tags/nstar">NStar</a><span class="pur_comma">, </span><a href="/tags/oge-energy">OGE Energy</a><span class="pur_comma">, </span><a href="/tags/oms">OMS</a><span class="pur_comma">, </span><a href="/tags/order-679">Order 679</a><span class="pur_comma">, </span><a href="/tags/order-890">Order 890</a><span class="pur_comma">, </span><a href="/tags/organization-miso-states">Organization of MISO States</a><span class="pur_comma">, </span><a href="/tags/pjm">PJM</a><span class="pur_comma">, </span><a href="/tags/president-obama">President Obama</a><span class="pur_comma">, </span><a href="/tags/rec">REC</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/rps">RPS</a><span class="pur_comma">, </span><a href="/tags/rto">RTO</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/tva">TVA</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a> </div>
</div>
Wed, 01 Apr 2009 04:00:00 +0000puradmin13728 at https://www.fortnightly.comTransmission is Bubblinghttps://www.fortnightly.com/fortnightly/2008/10/transmission-bubbling
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>A billion-dollar ‘gold rush’ could send<i> </i>grid rates through the roof.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Bruce W. Radford</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Commission Watch</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Bruce W. Radford</b> is publisher of <em>Public Utilities Fortnightly</em>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - October 2008</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/article_images/0810/images/0810-CW-fig-1.jpg" width="1377" height="1624" alt="" /></div><div class="field-item odd"><img src="https://www.fortnightly.com/sites/default/files/article_images/0810/images/0810-CW-fig2.jpg" width="1373" height="781" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Money may be difficult to come by for Wall Street financiers in these dark days, but apparently not for electric transmission construction—at least so far. A rash of recent orders from the Federal Energy Regulatory Commission shows that generous financial incentives remain available to companies seeking to expand the nation’s grid capacity.</p>
<p>Congress virtually mandated such incentives in the 2005 Energy Policy Act (EPAct), for grid build-outs that promise to ensure reliability or reduce the delivered price of electricity by relieving transmission congestion. The most recent award came only two weeks ago, when FERC granted an incentive adder to return on equity (ROE) worth a whopping 275 basis points for a 1,200-MW, high-voltage DC line proposed by New York Regional Interconnect, to bring upstate generation resources to market <i>(Dkt. EL08-39, 124 FERC ¶61,259, Sept. 18, 2008)</i>.</p>
<p>Yet these incentives have sparked a storm of protest for two new transmission projects proposed in New England. That’s where rising costs for construction materials have drawn attention to past and possible future cost overruns, and where cost hikes already have forced transmission rates up significantly, to ever-higher fractions of the retail<i> </i>distribution rate. Meanwhile, regional concerns over climate change (plus state-imposed measures to boost renewable energy) already have spawned disputes over grid-planning rules, driving a wedge between state regulators and the regional ISO—even pitting state against state—amid charges that renewable mandates and regional efforts at carbon control have led to a “greenwashing” of markets and the role they play in resource<i> </i>development.</p>
<p>This storm hit its apex on July 18, when the chairman of the Massachusetts state utility commission (DPU) delivered an impassioned plea to fellow members of a New England stakeholder group trying to sort out these issues, warning of dire consequences if state regulators should continue to hand over planning decisions to ISO engineers with slide-rules who remain financially unaccountable to retail ratepayers.</p>
<p>The two grid projects that have raised such a furor are slated for construction in the state of Maine.</p>
<p><i>• </i><b>Maine Power Reliability Program.</b> First, on July 1, Central Maine Power (a subsidiary of Energy East) applied to the state PUC for authority to build the largest single endeavor in company history, the MPRP. This project, a 245-mile, 345-kV transmission line (plus substations and related upgrades) is estimated to cost $1.36 billion. That’s about four times the value ($341 million) of CMP’s total transmission plant in service at the end of last year <i>(See <a href="http://www.mainepower.com">www.mainepower.com</a>)</i>.</p>
<p><i>• </i><b>Maine Power Connection.</b> A second application filed the same day at the PUC finds Maine Public Service Co. coupling with CMP on a different grid project slated to cost another $625 million. For this plan, the two utilities would divide costs on a 30-70 basis (MPS/CMP), with the MPS cost share figured at $184 million. Yet, consider that Maine Public Service as of mid-July claimed a total market capitalization of only $75 million. Its $184 million project share would run nearly 10 times the total value ($19 million) of transmission plant dedicated to service at MPS, as of year-end 2007 <i>(See <a href="http://www.mainepowerconnection.com" target="_blank">www.mainepowerconnection.com</a>)</i>.</p>
<p>Given the huge size of the projects, both utilities say they would rely on external financing. And to aid that effort, the utilities also have filed separate applications for each project at the FERC, seeking incentive rates that include ROE adders, current rate recovery of construction work in progress (CWIP—but only for the MPRP) and even possible cost recovery in the event of project abandonment.</p>
<p>As sole sponsor, Central Maine Power advances its MPRP project as a “reliability transmission upgrade” (RTU) approved by the ISO New England RTO (regional transmission organization) as a part of the regional system plan (RSP), and thus eligible for incentive rates under Federal Power Act sec. 219, and FERC Order 679, as a project necessary to maintain grid system reliability <i>(See, Petition for Declaratory Order Authorizing Incentive Rates, FERC Dkt. EL08-74, filed July 1, 2008).</i></p>
<p>Central Maine’s request, if granted, would boost ROE by 150 basis points—from 11.64 percent (OK’d in 2006 in FERC Opinion 489, for all New England grid owners participating in the RTO), all the way to 13.14 percent. Yet Maine PUC utility analyst Richard Kivela points out that CMP’s own data shows that CMP and other Energy East subsidiaries get by at the retail rate level with ROEs of 10.55 or less, granted by state PUCs in the region. And Eric J. Bryant, senior counsel in the Maine Public Advocate’s office, views ROE adders as “one of the primary causes for rising costs in this part of the country,” as seen in this excerpt from an email message that Bryant sent to the FERC on June 19:</p>
<p>“I just negotiated a multi-million dollar distribution rate decrease with our largest utility, and the entire decrease was wiped out by an increase in transmission costs.</p>
<p>“The adder is only part of the problem. FERC’s delegation of all cost responsibility to the ISO-NE (a utility that is not required to examine least costs) is the rest of it.”</p>
<p>The MPC project, sponsored jointly by CMP and Maine Public Service, stands on entirely different footing.</p>
<p>At present, Maine Public Service does not belong to ISO New England, and its service territory remains isolated as well, lacking a direct connection to the rest of New England, and instead relying on grid connections with New Brunswick and the Canadian Maritimes for a good measure of fuel diversity, resource adequacy, and ancillary services.</p>
<p>Thus, the MPC project, proposing 200 miles of new 345-kV line in Northern Maine, would not be required to ensure and maintain reliability within Maine and New England; the region is getting along fine today without the line. Rather, the project for the first time would forge a direct and sturdy link with the rest of Maine and New England, spanning a 25-mile gap and allowing MPS to join the RTO. (The remaining 175 miles of 345-kV line would reinforce portions of the MPS and ISO grid systems to enable development of a proposed 800-MW capacity wind farm in Maine’s Aroostook County, see below.) Connecting MPS with New England would mean an expansion of the ISO market area, with major implications for state energy policy, since the Maine PUC previously openly questioned whether the state’s utilities should withdraw from the New England RTO.</p>
<p>Earlier this year, in response to inquiries from the state legislature, the PUC argued that RTO methods for transmission-cost allocation tended to distort resource-planning decisions. The Maine regulators pointed out that regional “socialization” of grid-expansion costs (through postage-stamp rates) for projects designed to enhance reliability tended to favor grid solutions over generation sited closer to load <i>(See, Final Report to Utils. &amp; Energy Committee, Me.PUC, Jan. 15, 2008)</i>.</p>
<p>Also, by boosting grid capacity into and out of its service area, MPS would make possible the development of the planned 800-MW Aroostook Wind Energy (AWE) venture, not to mention imports from Canada of massive amounts of renewable energy (wind and hydro), that likely will become available in the future. Some say that New England will need projects such as the MPC, if ever it should entertain realistic hopes of complying with state-imposed renewable mandates, or its equally ambitious goals for carbon control, as put forth in the Regional Greenhouse Gas Initiative (RGGI).</p>
<p>Thus, CMP and MPS submitted their project as an economic grid expansion, known in New England as a METU (Market Efficiency Transmission Upgrade), which presumably would qualify for FERC incentives by reducing the cost of delivered electricity by reducing congestion <i>(See, FERC Dkt. EL08-77, filed July 18, 2008). </i></p>
<p>Nevertheless, as with CMP’s MPRP project, the Maine Power Connection has run into problems. In short, despite adding wind energy to the regional portfolio, the project might not actually reduce power prices, since Maine would remain export-constrained, which would limit sales of cheaper Aroostook wind power across the region—not to mention that experts believe gas-fired turbines (the unit of choice in New England) likely would continue setting the marginal clearing price in the RTO’s regional spot energy markets. Also, the project certainly will not reduce congestion, but in fact might increase it, by inviting imports of Canadian power into Maine, where they would remain bottled up without enough grid capacity to move the power further to Southern New England, where it would be needed to meet renewable mandates. The only constraints that MPC might relieve would be the congestion that it would cause itself—the traffic added to the grid from the Aroostook wind farm, which would exist only on condition of building the new line.</p>
<p>As the Connecticut Consumer Counsel and state utility commission explain, incentive rates for the MPC project will allow the sponsors to “insulate themselves from all risks and collect hundreds of millions of dollars to build a transmission line to nowhere.”</p>
<p>Donald Downes, chairman of the Connecticut DPUC, writing to ISO-NE president and CEO Gordon Van Welie on July 10, likened the MPC project more to a gen-plant proposal or resource-development venture, rather than a classic regional transmission project. He suggested a simultaneous evaluation of multiple competing development proposals, “rather than a ‘gold rush’ approach in which individual proposals are examined in isolation on a first-come, first-served basis.”</p>
<p>Lastly, the ISO never has recommended the MPC project as a system expansion, and has not yet agreed to include the project as a qualifying METU within its current Regional System Plan, so that it appears the project cannot qualify under EPAct and FERC Order 679 as having “resulted” from a fair and open regional process for transmission planning that evaluates energy pricing and line congestion. Rather, the RTO so far has treated the MPC project only as an “elective” upgrade, proposed by the utilities on a “volunteer” basis.</p>
<p>There’s much more to it than this, but suffice to say that as the first-ever METU project proposed for New England,<i> </i>the MPC raises so many novel questions that the RTO has formed a new working group, the Economic Studies Process Stakeholder Group, to reconsider how<i> </i>it will integrate market-based generation resource development with ISO-sponsored and rate-regulated transmission planning. That’s where Massachusetts DPU chairman Hibbard steps in, with no shortage of forthright advice.</p>
<p><a href="http://www.iso-ne.org/committees/comm_wkgrps/othr/econ_stdy/index.html" target="_blank">Hibbard’s 5,000-word talk is available in full on the ISO-NE website</a>. And while the draft is marked “not for citation,” the Maine PUC and the Maine Office of the Public Adovcate already have filed a copy at FERC as evidence in the MPC grid-incentives case.</p>
<p>On one hand, Hibbard believes the science of climate change “is clear and unequivocal,” and swears that “we would be fools” to ignore the “vast, wind, hydro, biomass and other low-carbon resource options within and just beyond the borders” of the New England region—resources that Hibbard says “are counted in gigawatts, not megawatts.”</p>
<p>Yet Hibbard claims also that the wind industry “is no longer one that needs to be pampered,” since wind resource development is driven no longer by wildcatters, “but by institutions with extremely deep pockets and sophisticated development strategies, including FPL …Boone Pickens … and Iberdrola, a company that has a market capitalization of more than $60 billion.”</p>
<p>Thus, Hibbard warns at length that utility industry resource planning must acknowledge these truths, but must avoid allowing the process to be co-opted by ISO engineers with slide-rules, who owe no financial accountability to ratepayers:</p>
<p>“Opinions on whether we will or will not meet renewable or environmental standards, or whether or not specific generating development options will depress market prices, or lower the marginal price of a carbon allowance, are valuable judgments that should be considered in the development of state law and policy, but they cannot and must not be used as any formal justification for infrastructure development or the allocation of transmission or any other system costs, where those determinations are made in a forum that is driven only by stakeholder committees and subject only the jurisdiction of FERC.</p>
<p>“And that is where I fear we are headed.”</p>
<h4>Cost Overruns</h4>
<p>Citing what it alleges as significant cost overruns for electric transmission projects now underway, the New England Conference of State Public Utility Commissions (NECPUC) filed a complaint earlier this summer, questioning the wisdom of granting open-ended ROE adders (since they grow in lockstep with project budgets) and urging FERC to step in and stop the bleeding.</p>
<p>In the NECPUC complaint, the New England state regulators advance the very sensible notion that transmission rate incentives must be keyed to consumer benefits, and so must be made subject to a downward adjustment ordered by FERC if costs should rise in the future, above the level projected in the original application for the incentive. In particular, NECPUC wants to roll back certain ROE adders that FERC granted to utility transmission owners participating in the New England RTO, a group known as the NETOs, which includes Central Maine Power.</p>
<p>In many cases, according to NECPUC, these cost overruns pertain to New England transmission projects that ISO-NE OK’d for its 2004 transmission expansion plan (RTEP-04), and that were scheduled to go into service by the end of calendar 2008, and so qualified for an incentive-driven 11.64 percent ROE under the terms of FERC Opinion 489, which governed incentive rates for the NETOs for projects proposed before Congress passed EPACT, and before the FERC issued interpretive rules under Order 679 <i>(See, Opin. No. 489, Dkt. ER04-157, Kelly and Wellinghoff, dissenting, 117 FERC ¶61,129, Oct. 31, 2006)</i>.</p>
<p>The state regulators cite numerous examples, some listed here, comparing project cost estimates from 2004, with actual or current estimated costs as given by ISO-NE in its Regional System Plans for 2007 or 2008:</p>
<p>• <b>NSTAR 345-kV Trans. Reliab. Proj.</b> Costs up $57 million (30 percent), from $217 million in RTEP-04, to $283 million in RSP-07.</p>
<p>• <b>Central Maine Proj. ID 149.</b> Costs up from $3.3 million (2006) to $7.5 million (Oct. 2007).</p>
<p>• <b>National Grid Project ID 170.</b> Estimates up from $5.54 million (2006) to $13.4 million (Oct. 2007).</p>
<p>• <b>Northeast Utils Proj. ID 187.</b> Costs up from $120 million to $183.2 million between July 2006 and Oct. 2007. And then to $234.2 million as of April 2008.</p>
<p>• <b>Northeast Utils. Middletown-Norwalk Proj.</b> Current price tag approximately $1.4 billion—“about twice as much as its estimated cost only a few years ago.” (Expected in service early 2009.) <i>(See, Complaint of NECPUC, pp. 3-13, FERC Dkt. EL08-69, filed June 12, 2008.)</i></p>
<p>According to the Maine PUC, cost overruns like these, plus the incentive rate adders granted by FERC, have led recently to “extraordinary increases in regional transmission rates.”</p>
<p>For example, the PUC reports that the formula rate filing for the New England TOs shows an increase in rates from $27.90/kW-yr to $44.40/kW-yr between 2007 and 2008 (<i>see Figure 2</i>), translating into an approximate 6.5 percent increase in the distribution component of Central Maine Power’s retail residential rates. The PUC adds:</p>
<p>“With the increases in transmission costs due to major new projects, a pattern of significant cost overruns, and the commission’s ubiquitous and generous grant of ROE adders in recent years, transmission is becoming an increasingly large component of the overall electricity rate.</p>
<p>“Currently it is close to 10 percent of the all-in rate for CMP residential customers and 20 to 24 percent of total CMP delivery-only rates” <i>(Motion to Hold Petition in Abeyance, p. 18, FERC Dkt. EL08-77, filed Aug. 29, 2008)</i>.</p>
<p>In defending incentives for its MPRB project, Central Maine projects that its interest coverage ratio during the construction period will decline from 4.4 to 3.4, a figure more characteristic of companies with credit ratings lower than CMP’s current BBB+/A3 ratings. It adds that a FERC incentive allowing current rate recovery of CWIP would help boost its coverage ratio to 4.2 during the height of construction.</p>
<p>Maine PUC analyst Richard Kivela counters, however, that for T&amp;D utilities like CMP (and MPS) that have divested themselves of generation assets and which carry very low business risk profiles, the S&amp;P guidelines indicate that a 4.2 coverage ratio actually would be consistent with a “high-A” to “low-AA” credit rating.</p>
<p>Kivela adds that CMP’s case for incentives is undercut by Iberdola’s friendly merger offer of $28.50 per share for stock in CMP’s parent company, Energy East. According to Kivela, Iberdola’s offer represents a premium of more than $1.2 billion over book value, indicating that an appropriate ROE for CMP would fall within the range of 10.5 to 11.0 percent—substantially lower than CMP’s requested figure 13.14 percent, reflecting FERC incentives for grid expansion.</p>
<h4>Maine Makes a Market?</h4>
<p>In August 2007, ISO-NE released the final draft of its “New England Electricity Scenario Analysis,” in which the RTO documented that the region would need another 8,000 MW of electric capacity by 2020 to 2025, but that adding gas-fired capacity to meet that challenge (the likely capacity of choice absent major changes in RTO policy), would expose the New England region “to potentially high prices and additional fuel-diversity issues.”</p>
<p>The analysis concluded that alternative paths favoring renewables could save New England over $1.5 billion per year (almost 14 percent of total system costs) versus the “business as usual,” carbon-heavy path represented by power plants already proposed and listed in the region’s interconnection queue.</p>
<p>In particular, the report favored wind and other similar generating choices that could provide energy “at low to no fuel cost,” thereby resulting in “the lowest system-wide electric energy prices, emissions, and use of fossil fuels.”</p>
<p>That policy document today drives much of New England’s big picture planning. Yet it appears that facts on the ground are conspiring against such thinking.</p>
<p>First, EPAct and FERC’s interpretive rules for grid-expansion incentives reward only those projects that ensure reliability or reduce line congestion, and MPC, unfortunately, does neither.</p>
<p>In fact, New England as of 2007 had “little persistent transmission congestion,” according to Stephen J. Rourke, ISO-NE vice president for system planning, in remarks he gave on July 9 in Hartford, <a href="http://www.congestion09.anl.gov/documents/docs/Rourke_ISO_New_England.pdf" target="_blank">at a DOE workshop on transmission congestion</a>.</p>
<p>Second, MPC likely would not even cause spot-market energy rates to fall much in New England, since the RTO’s single-price auction market for energy relies on locational marginal pricing, and even a large dollop of imported wind capacity probably would not displace gas-fired turbines from their position as the price-setters operating on the margin.</p>
<p>Third, the MPC project would produce a perverse rate-making result, in effect transferring costs to retail ratepayers, in the form of higher regional transmission rates, that otherwise ordinarily would fall under the responsibility of power-plant developers.</p>
<p>Massachusetts DPU chairman Paul Hibbard explained this idea in July in his “not for citation” presentation before the ISO’s new ESP Stakeholder Group:</p>
<p>“Price will be determined by the marginal price of natural gas fired, generation … We cannot change this. We cannot change it by building different types of generation. We cannot change it by building transmission to remote generation. And we cannot change it by selecting the types of wholesale generation resources added to our region—whether fossil, nuclear, or renewable.”</p>
<p>Hibbard now explains the discouraging reality of banking on a big grid build-out to bring distant renewables to urban markets:</p>
<p>“Separately funding transmission from new generation resources whether in Southern New England, offshore, or to bring power in from New York, Northern New England or Canada cannot materially impact the wholesale cost of power in the region. On the other hand, it would affect the price of delivered power at the retail level, but only by increasing it by the cost of transmission that otherwise would remain the responsibility of the generation developer.”</p>
<p>Is it true what they say: “As Maine goes, so goes the nation?”</p>
<p>If so, then Massachusetts regulator Hibbard offers some sobering advice:</p>
<p>“The price tag for the Maine Power Connection (and interconnection projects under consideration by this working group) is extraordinary—in the billions.</p>
<p>“So it simply won’t be enough to just assert or model that a project or plan provides carbon benefits—they will<i> </i>have to be certain.”</p>
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Wed, 01 Oct 2008 04:00:00 +0000puradmin13777 at https://www.fortnightly.comQuixotic Commission?https://www.fortnightly.com/fortnightly/2008/06/quixotic-commission
<div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Michael T. Burr</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">People in Power</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Michael T. Burr</b> is <i>Fortnightly’s</i> editor-in-chief. Email him at <a href="mailto:burr@pur.com">burr@pur.com</a>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 2008</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>When Spanish utility giant Iberdrola announced last June that it would acquire Maine-based Energy East for $4.5 billion, it signaled a potential surge in major foreign owners buying into U.S. utility companies.</p>
<p>The deal seemed to be moving smoothly, garnering approvals from Energy East shareholders as well as federal and state regulators. But then the staff of the New York Public Service Commission (PSC) indicated they might require more from Iberdrola before approving the acquisition. The main sticking point: The potential for Iberdrola to dominate the windpower industry in New York.</p>
<p>Specifically the PSC staff said Iberdrola would need to divest its 50 percent interest in the Maple Ridge wind farm, New York’s largest, with 195 turbines totaling 320 MW of windpower capacity.</p>
<p>A global leader in windpower development, Iberdrola hopes to build at least 10 new wind farms in the state. Iberdrola agreed to sell Energy East’s fossil-fueled power plants in New York to appease the commission’s market-power concerns, but the company is standing firm on its windpower position.</p>
<p><i>Fortnightly</i> spoke with Pedro Azagra, director of corporate development for Iberdrola S.A. in Bilbao, Spain, to get an update on the acquisition, and his impression of U.S. merger-approval processes.</p>
<p><b>Fortnightly: What’s the status of your plans to acquire Energy East? </b></p>
<p><b>Azagra: </b>The only thing pending is the New York PSC’s approval. An administrative law judge is expected to issue his recommendation to the PSC by early June, and then the commissioners make their decision.</p>
<p>The only party that has a position we strongly disagree with is the staff of the New York PSC. The other parties are willing to make a deal.</p>
<p><b>Fortnightly: New York seems to be saying they have an unbundled power market, and they won’t allow Iberdrola to control both generation markets and retail distribution. How will Iberdrola overcome that position? </b></p>
<p><b>Azagra: </b>It’s easy for regulators to say we have this policy and we’re going to comply with it. But in fact that policy shouldn’t affect our deal.</p>
<p>Three items are most important for our deal. First is protecting consumers from financial risk. Staff will argue that we need to protect the ratepayers and quality of service at Energy East, and make sure it doesn’t become a more risky company when changing hands. A few simple hints will tell you how much better off the company will be with us than without us. We have credit ratings one, two and three notches higher than Energy East. And if you look to our capacity to pay our bills—our interest ratios— you’ll see that Iberdrola has two to three times better ratios. Those two numbers give you a simple way to understand how much better financially protected the company is going to be.</p>
<p>Also we’ve raised cash to pay for this acquisition. There will be no debt at all in this buyout, compared to other deals.</p>
<p>The second item is vertical market power. Energy East owns certain generation assets and they haven’t been forced to sell them. So how can someone who buys shares in that company have any more market power than Energy East does?</p>
<p>Iberdrola has strong plans for windpower in New York, but wind technology is not a market-power technology. Market-power technologies are those that are capable of fixing prices. Wind doesn’t blow when you want it to, plus it isn’t economically efficient. You need tax credits or other mechanisms to make it viable. It’s not a market-power technology if it’s either subsidized or a price taker. It would be the first time in the world that a regulator is treating wind as a market power technology.</p>
<p>Some might argue the problem isn’t really market power in terms of prices, but Iberdrola’s affiliation with the subsidiary that owns the capacity. The subsidiary could call the utilities and say when you’re talking to Iberdrola Renewables make sure the connection gets done faster. But that’s not a market- power issue, but a code-of-conduct issue. The New York ISO has rules for connecting power plants and the public process involved. If you have any doubts about how we’ll behave, you’re saying we won’t obey the law. I have no problem with any enhanced code of conduct, but don’t tell me it’s a market-power issue.</p>
<p>The third category is what the PSC calls the benefits of the transaction. We are offering $200 million in benefits for consumers, $50 million up front in day-one rate reductions. Looking to the last 10 years of comparable transactions, the range of such benefits is from $40 million to $160 million. We wanted to make customers happy, so that’s why we went to the upper end of the range.</p>
<p>Some people in New York might say we don’t need Iberdrola, but New York needs investment. We are the number-one renewable company in the world, and we want to invest a lot in the state. If we send a message that we are out of New York, that’s a bad thing for a lot of people. Turn it around. New York wants to add 7,000 MW of renewable projects. How much of that is real? Can it be built in three to five years as hoped? How many of the people sponsoring projects have turbines? Iberdrola has 1,000 MW of turbines each year for the next five years. We would love to put as much as possible into New York. Ask other people how many turbines they have to put into operation. You’d be shocked.</p>
<p><b>Fortnightly: What does the Energy East acquisition have to do with Iberdrola Renewables’ investment plans for New York? </b></p>
<p><b>Azagra: </b>When going into the United States, we need to focus from a geographical point of view. We can’t do a utilities business in Oregon, wind in New York and gas in Michigan. We like to focus, and we take an integrated position, with supply, T&amp;D and gas storage. Our commitment is to focus in the region. To just do wind in New York doesn’t make sense for us. But New York and New England, as a utility and wind development, it’s the right opportunity.</p>
<p><b>Fortnightly: I hear talk about Iberdrola being courted by EdF, and about Iberdrola trying to buy British Energy. How does an investment in Energy East figure into Iberdrola’s global business position? </b></p>
<p><b>Azagra: </b>We want EE to become the heart of Iberdrola in the United States. It’s small but we will use it for a platform to make big investments. Once we complete the acquisition, the next item is how many billion dollars can we invest?</p>
<p><b>Fortnightly: What’s your perspective on the U.S. market at this point? What do you think of the way we review and regulate utility mergers? </b></p>
<p><b>Azagra: </b>We’re the second largest wind operator today in the United States, and the third largest gas-storage company. We’re very happy with the U.S. market. But the regulatory process is very strange. You can close a $20 billion deal in Europe in three months, but a $4 billion deal in the United States takes a year or more. That’s strange, and something is wrong with one of them. You can guess which one I think.</p>
<p>Regarding regulation and market power policies, you should ask the PSC staff to explain the success of market power policies in New York. After several years of unbundling the state has the third highest market prices in the United States. Why? That’s the question we should be asking.</p>
<p><b>Fortnightly: If market power isn’t an issue, why do you think the commission has taken its position? </b></p>
<p><b>Azagra: </b>If you review the staff’s approach to the last 10 years of deals, you’ll find the answer. They are doing their job as they understand it, and they are trying to put the deal through this approach. But we don’t think we should be making statements on the assumption we are negotiating. When I want $100, I say $100.</p>
<p>We take the regulatory process seriously. But in New York when they want to reach $100, they say $400. When you go through the numbers and requests, people have an issue explaining where the numbers come from.</p>
<p><b>Fortnightly: Are you saying New York is negotiating to get a bigger payoff? </b></p>
<p><b>Azagra: </b>That is what a lot of people would tell you. That’s why only one party would take such an extreme position.</p>
<p>Sometimes these deals are problematic. We have many parties in favor of it, which gives us comfort that we are doing the right things. Maine has a track record of being tough, but we reached a settlement without even $1 being considered. They’ve given a lot of importance to Iberdrola taking over Central Maine Power, and what it means for such a big company to be making such an investment in the state.</p>
<p>We have a lot of companies calling us, asking to do business. We’re not asking to be treated favorably, but just the same as others. Approve the deal in accordance with how you’ve approved deals before, and let me invest.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/mergers-acquisitions">Mergers &amp; Acquisitions</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/wind">Wind</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/people-power">People In Power</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/0806-cvr.jpg" width="1121" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
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<a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/iberdrola-renewables">Iberdrola Renewables</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/new-york-psc">New York PSC</a><span class="pur_comma">, </span><a href="/tags/new-york-public-service-commission">New York Public Service Commission</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a> </div>
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Sun, 01 Jun 2008 04:00:00 +0000puradmin13796 at https://www.fortnightly.comPulling An Inside Jobhttps://www.fortnightly.com/fortnightly/2007/05/pulling-inside-job
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>PJM loses luster in a squabble over market monitoring.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Bruce W. Radford</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Commission Watch</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Bruce W. Radford</b> is editor-in-chief for <i>Public Utilities Fortnightly</i>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - May 2007</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The bottom fell out in the hearing room at the Federal Energy Regulatory Commission (FERC) on April 5 when witness Joseph Bowring let it slip that, yes, he might well prefer more independence from his employer in his role as chief of the market monitoring unit (MMU) at the PJM Interconnection.</p>
<p>But he almost lost his chance, as he had to ask for extra time from Steve Harvey, the FERC staffer in charge of sounding the buzzer when each witness reached the end of his allotted time.</p>
<p>MR. HARVEY: Dr. Bowring, your time is up.</p>
<p>MR. BOWRING: Okay. Can I just make two points that I wanted to get to?</p>
<p>MR. HARVEY: Very quickly.</p>
<p>FERC CHAIRMAN JOSEPH KELLIHER: Very quickly.</p>
<p>MR. BOWRING: The first is that my experience — and it’s in my written document, as well — my experience at PJM is that we have not been permitted to be independent and there have been — we’ve seen significant issues with conflicts with PJM, and where there were conflicts, our independence has at times — not all the time, obviously — but has, at times, been compromised. (<i>See, Review of Market Monitoring Policies, FERC Docket No. AD07-8, Technical Conference, April 5, 2007, transcript, p. 75.</i>)</p>
<p>Well, then. That’s not your typical testimony at a FERC technical conference. But in fact, however, Bowring was not yet done. He continued that at PJM, the only regional transmission operator with an in-house unit for market monitoring (MMU), “it can happen” that RTO management might require the market monitor to alter the contents of an official report, presumably for political reasons.</p>
<p>Bowring’s written testimony was not available on the FERC Internet site as of April 18 (where the meeting transcript can be found), but someone somewhere did find the original and included a copy in the public record. (It’s from a photocopy. You can still see the shadow of someone’s highlighting marks in the margins.)</p>
<p>Thus, the complaint filed April 17 by the District of Columbia Office of People’s Counsel, and a host of other public advocates and public power utilities included Bowring’s original written testimony as an attachment. The complaint then cites that testimony as providing evidence of several concessions made by the PJM’s MMU staff. One was having to modify PJM’s recent “state of the markets” report. Another was delaying release of an MMU report because management had disagreed with its conclusion. The complaint and the cited testimony also suggested that PJM may have taken steps to deny access by the MMU to certain market databases, or at least to have begun pushing the MMU out by preparing to transfer access to a third party. <em>(See, Allegheny Elec. Co-op., Inc. et al. v. PJM Interconnection, LLC, FERC Docket No. EL07-56, filed April 17, 2007.)</em></p>
<p>The purported written testimony is particularly interesting for its many real-world-sounding anecdotes.</p>
<p>For example, as reported by that complaint, the Bowring written testimony claimed that PJM CEO Phil Harris actually had told the MMU staff only a week earlier that PJM would replace them with an outside consultant. Moreover, if the staffers would play their cards correctly, they easily could lock up another plum job somewhere else within the organization, if interested, since the staffers were experienced and well-qualified for many other jobs requiring expertise in wholesale-power markets.</p>
<p>This written testimony claimed even that PJM management already had taken steps to hold on to valued MMU employees:</p>
<p>“A job description was posted this week that precisely matches the market monitoring duties of one of the MMU supervisors, a person with specific, virtually irreplaceable monitoring skills and knowledge developed both in prior jobs and while working at the MMU.”</p>
<p>Such a revelation would come as news to many — even to stakeholders who previously had urged PJM to tighten up its market-monitoring function. Yet things became even more curious when you consider that on April 13, a week following the conference at FERC, PJM issued a press release denying that PJM management ever had told the MMU that it would be disbanded.</p>
<p>“It has been erroneously asserted,” read the press release, “that PJM has already informed the Market Monitoring Unit that it intends to disband the group.”</p>
<p>The news release added that on April 6, the day after the technical conference at FERC, PJM had convened a special meeting of its Board of Directors to deal with the situation. Also, that it had hired an outside counsel to lead an investigation of market monitoring at the RTO, with CEO Phil Harris recusing himself from participating.</p>
<p>Now, in addition to its efforts at re-examining its long-running policy on RTO market monitoring, the FERC also must deal with the April 17 complaint cited above, which asks FERC to provide relief along several lines:</p>
<p>• Direct PJM to show cause why it should not be found to have actively attempted to undermine the market monitor;</p>
<p>• Direct PJM to show cause why it should not be found to be in violation of its tariff, requiring it to provide the MMU with adequate resources to do its job; and</p>
<p>• Direct PJM to comply with its tariff by giving the MMU full access to relevant data and databases, maintaining its staffing at the 2006 level, and ensuring that the MMU has sufficient independence to do its job.</p>
<p>This entire episode clearly has proven to be damaging for PJM, as Bowring’s testimony — his written version, at least — has questioned the very survival of PJM’s ongoing market-monitoring function:</p>
<p>“I believe,” writes Bowring, “that if PJM management continues on its current path with respect to the MMU, within a very short time we will not have adequate resources to meet our tariff-defined responsibilities.</p>
<p>“I also believe that if PJM management continues its current path, within a very short time we will not be able to collect and maintain information as we are required to do under the tariff.” <em>(See FERC Docket EL07-56, Apr. 17, 2007, attachment A.)</em></p>
<p>Back at the conference, Bowring continued to speak extemporaneously, answering questions posed by the commissioners and Chairman Kelliher:</p>
<p>CHAIRMAN KELLIHER: Now, Joe, is it your suggestion that you think it either should be internal only or both internal and external …</p>
<p>MR. BOWRING: I think … … based on my own experience over the last couple of years and, particularly, more recently, that the market monitoring units [should] be accountable and responsible to some entity other than the RTO. …</p>
<p>Being an employee of the RTO … creates what I think are impossible ongoing differences because, for whatever reason, for better or worse, it’s not an indictment of either market monitoring or the RTO management.…</p>
<p>CHAIRMAN KELLIHER: Mr. Bowring has raised certain allegations. I saw them for the first time this morning. I think he might have given them to us late last night or this morning at some point.</p>
<p>I like Mr. Bowring. I respect him. But I don’t feel comfortable assuming that his version is the complete story … I have reviewed his comments and I think we’ll listen to more than one version of events, though.</p>
<h4>Illinois: Auction Gone Haywire?</h4>
<p>Imagine waking up one morning in your home in Chicago — let’s say on January 2, 2007 — and discovering that your residential electric bill, courtesy of Commonwealth Edison (an Exelon subsidiary) suddenly has climbed more than 25 percent. Or perhaps 43 or 55 percent, depending on whether you use electricity for heating, and whether you live in single-family or multi-family housing.</p>
<p>Or you might wake up downstate, where service comes from Ameren subsidiaries Illinois Power, Central Illinois Light (CILCO), or Central Illinois Public Service (CIPS), and see residential bill increases running anywhere from 88 to 125 percent (heating), or 49 to 80 percent (non-heating service).</p>
<p>Commercial and Industrial (C&amp;I) classes would see even higher hikes — assuming that the customer still was taking bundled, standard-offer electric service from the local distribution utility.</p>
<p>This turn of events has now come to pass under the retail-choice regime in force in Illinois, one of the few remaining pro-competition states, where ComEd and Ameren no longer own generation, having sold off their plants as directed by state policy on industry restructuring. Thus, they will buy long-run wholesale-generation supply contracts from independent power producers via the state’s newly established generation auction. (<i>See, <a href="http://www.Illinois-Auction.com" target="_blank">www.Illinois-Auction.com</a>.</i>)</p>
<p>The first auction was held for four days last year in early September, in which prices cleared for wholesale-power purchases for some 25,000 megawatts (about one-third of Illinois retail load served by the ComEd and Ameren), over contract terms of 17, 29, and 41 months. In future years, after the pattern gets set, contract terms will run a uniform 36 months.</p>
<p>Citing the afore-mentioned double- and triple-digit increases in retail electric bills, Illinois Attorney General Lisa Madigan has filed a complaint at the FERC. The AG asks federal regulators to set aside or modify the wholesale-power purchase contracts signed by the utilities as a result of the auction, to order refunds, and also to investigate certain allegations of price fixing or manipulation. <em>(See, People ex rel. Illinois AG v. Exelon Generation Co. et al, FERC Docket EL07-47, filed March 15, 2007.)</em></p>
<p>The complaint pits the Attorney General against the state utility regulator, the Illinois Commerce Commission, and against the state’s regulatory regime in general. That’s because the Illinois commission has found officially that the auction was conducted fairly and has largely accepted the auction result.</p>
<p>“It was managed well,” the commission ruled last year.</p>
<p>“All the relevant rules were carefully followed, and there was no evidence that collusive or coordinated bidding behavior undermined competitiveness.” <em>(See, Order Initiating Investigation, Ill. CC No. 06-0624, Sept. 14, 2006, p. 8.)</em></p>
<p>However, the state commission rejected the auction result and the implied contracts that were put up for bidding with an hourly price term. In the hourly section, suppliers bid for the right to collect a fixed-capacity charge, but with the price term for the generation supply component set to vary according to the hourly spot market price. For those contracts (which cleared at $175.35/MWh for Com Ed, and $276.19/MWh for Ameren), the commission found a fatal shortage of bidders.</p>
<p>According to the AG, the authority to modify the contracts would come in significant degree from the very newest interpretation of FERC’s <i>Mobile-Sierra</i> doctrine, which has received a lot of press recently, as handed down last year by the U.S. Court of Appeals for the 9th Circuit, most notably in the case of <i>Pub. Util Dist. No. 1 of Snohomish County v. FERC. 471 F.3d 1053.</i> This new version of the doctrine arguably would compel the FERC to grant a third-party request to modify a wholesale-power contract<i> ex post facto</i> if its terms are not “just and reasonable,” even if the “public interest” does not warrant such modification. This new interpretation has since won endorsement from the influential D.C. Circuit in <i>NStar Elec. &amp; Gas Corp. v. FERC</i>, decided on March 9. In that case, the court said that the doctrine extended even to contracts signed to ensure reliability, such as where an RTO signs a “reliability must-run” deal with a producer in a load pocket.</p>
<p>(For background, see in this issue, “<a href="http://www.fortnightly.com/fortnightly/2007/05/mobile-sierra-doctrine-return-its-statutory-roots">The Mobile-Sierra Doctrine: a Return to its Statutory Roots</a>,” by Scott H. Strauss and Jeffrey A. Schwarz. See also, Commission Watch, “<a href="http://www.fortnightly.com/fortnightly/2007/03/mobile-sierra-doctrine-part-deux">The Mobile-Sierra Doctrine, Part Deux</a>,” by Stephen L. Teichler and Ilia Levitine, <i>Public Utilities Fortnightly</i>, March 2007.)</p>
<p>In Illinois, the auction returned prices of between $63 and $66 per megawatt-hour (MWh) for wholesale power supplies contracted by ComEd and Ameren for residential and small-to-medium-sized nonresidential customers, over terms running from 17 to 41 months. The auction price for a 17-month term was higher for C&amp;I service ($90.12/MWh for ComEd; $84.95/MWh for Ameren).</p>
<p>Citing these clearing prices, the AG cries “foul.” She points out that the overall average clearing price of $70.14/MWh for 90 percent of all hours will run more than three times the marginal cost of producing electricity in the relevant area. She provides testimony, for example, from Stanford University Professor Jonathan Koomey, showing that marginal power production costs at Illinois nuclear plants operated by Exelon Generation Co. (ExGen) totaled only about $17.80/MWh in 2004. Madigan adds that a recent study by Argonne National Laboratory and the University of Illinois found that marginal-power generation prices in the region fell between $20 and $28 over 90 percent of the time. The Argonne study suggests that marginal production costs remain under $36/MWh for 95 percent of hours.</p>
<p>Add in the fact that one bidder — ExGen — won 97% of the single-tranche contracts to provide standard-offer power supply to ComEd via the most valuable contracts (the 41-month auction term), and Madigan begins to see evidence of some sort of manipulation or collusion. In a supporting affadavit, industry consultant and occasional <i>Fortnightly </i>author Robert McCullough had suggested that a dominant bidder like ExGen “could control the level of competition it might face by choosing which products to make available to other bidders through bilateral contracts prior to the auction.” That is, that a dominant supplier could corner the winning bids by selling power to competitors beforehand at the bilateral market price, thus encouraging them to skip the auction, or to submit only uncompetitive bids in the auction.</p>
<p>So why the high auction prices?</p>
<p>According to the analysis of the Illinois commission staff, the auction prices included risk premiums. These premiums stemmed largely from the fact that the auction required suppliers to bid not on a fixed quantity of megawatts or demand, but in tranches that each reflected a fixed percentage of load ultimately to be served, whatever that load might turn out to be. Thus, the risk relates to possible future changes in population or economic growth rates, and the propensity of customers (especially the C&amp;I class) to switch to alternate suppliers. The staff pegged the implied risk premiums at 7%, 11% and 12% for the three ComEd contract terms, and 18,% 21%, and 25% for Ameren. The risk of switching explains why the C&amp;I premium ran higher — at 53% and 68%, respectively. (<i>See, Post-Auction Public Report of the Staff, Illinois Commerce Commission, Dec. 6, 2006, at <a href="http://www.icc.illinois.gov/docs/en/ Post_Auction_Public_Report_Staff.pdf" target="_blank">www.icc.illinois.gov/docs/en/ Post_Auction_Public_Report_Staff.pdf</a></i>.)</p>
<p>In fact, the commission staff suggests that the state’s retail choice plan has fared well, in terms of price comparisons.</p>
<p>After accounting for the initial rate discounts and freezes imposed after 1997 when Illinois took up retail choice, and after also considering general price inflation (23% from 1997 to 2006; 67.5% for energy costs over the same period), the staff reports a real rate decrease of 22% in real terms for ComEd’s retail residential nonheating customers, in comparing pre-1997 rates with post-auction bills. On the same basis, Illinois Power would show an 11% rate cut. Rates rise 5% for CIPS and 18% for CILCO.</p>
<p>Comments and answers to the Illinois AG’s complaint won’t be due until at least the first of June.</p>
<h4>Maine: Gone Missing?</h4>
<p>Much has been written already in other media — including this magazine’s electronic sister newsletter, Fortnightly’s SPARK — about the studies underway at the Maine Public Utilities Commission to consider whether Central Maine Power and Bangor-Hydro should quit the New England RTO.</p>
<p>The PUC bristles at the fact that the state must subsidize 8.5% of the cost of embedded transmission plant and further expansion across the entire RTO footprint (on a load-ratio basis), while it recovers revenues only for the share of grid investment (about 4%) that is located physically within state boarders.</p>
<p>In similar fashion, Maine ratepayers end up paying a load-ratio share of the RTO’s VAR uplift costs — costs incurred when power plants must forgo market sales and instead operate to supply voltage support for the largely out-of-state grid network, especially to bolster weak grid investment in the Boston area. Power plants must supply VARS when called, even if out of merit. <em>(See, for example, “Maine Prepares Utilities to Leave RTO,” by Lori A. Burkhart, Fortnightly’s SPARK, March 2007, p. 6.)</em></p>
<p>But now we have two new recent developments.</p>
<p>First, the Maine PUC now has put its money on the table with a complaint filed at FERC. The complaint repeats the same two basic objections noted above, and thus puts the state on record as having pursued all available remedies before its two major utilities would propose such as drastic step as to leave ISO New England. The complaint will give FERC a chance to rule on whether the RTO policy in New England really discriminates against the state of Maine. (<i>See, FERC Docket No. EL07-38, filed Feb. 26, 2006</i>.)</p>
<p>Second, Maine PUC chairman Kurt Adams might have won some sympathy for his state’s cause at the recent technical conference on seams issues for RTOs and ISOs in the Eastern Interconnection, held on March 29 at FERC (<i>Docket AD06-9</i>).</p>
<p>Adams didn’t miss a beat when when FERC Commissioner and former Arizona regulator Marc Spitzer widened the discussion to compare the systemwide benefits of grid expansion with using the nation’s Interstate Highway System to deliver fresh Maine lobsters to the people by truck.</p>
<p>Adams picked up immediately that without enough toll booths, whether on the grid or the highways, a postage-stamp rate just creates a subsidized system that skews the economics, as seen in New England:</p>
<p>“You’ve got to move those lobsters. You’ve got to pay those tolls.”</p>
<p>Also, Adams knew it was Nat King Cole who got his kicks on Route 66.</p>
<p>COMMISSIONER SPITZER: Let me give you an analogy here. In the early 1950s the federal government decided that we needed an interstate highway system. There was some fight initially … complaining about Route 66 in the West. Yet the Sinatra song evolved into a new highway system … People in Philadelphia could get fresh lobster that evening …</p>
<p>You explained the dilemma confronting the state of Maine … that your people are penalized in two ways with transmission construction …</p>
<p>How, from your perspective, do you resolve that dilemma?</p>
<p>MR. ADAMS: I’m still thinking of the Sinatra song.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/commission-watch">Commission Watch</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/commission-watch">Commission Watch</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/article_images/0705/images/0705-cvr.jpg" width="1121" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
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<a href="/tags/ameren">Ameren</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/cip">CIP</a><span class="pur_comma">, </span><a href="/tags/cips">CIPS</a><span class="pur_comma">, </span><a href="/tags/citi">Citi</a><span class="pur_comma">, </span><a href="/tags/comed">ComEd</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/eastern-interconnection">Eastern Interconnection</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/exelon-generation">Exelon Generation</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission-ferc">Federal Energy Regulatory Commission (FERC)</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/hydro">Hydro</a><span class="pur_comma">, </span><a href="/tags/illinois-commerce-commission">Illinois Commerce Commission</a><span class="pur_comma">, </span><a href="/tags/interconnection">Interconnection</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/iso-new-england">ISO New England</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/joseph-bowring">Joseph Bowring</a><span class="pur_comma">, </span><a href="/tags/kurt-adams">Kurt Adams</a><span class="pur_comma">, </span><a href="/tags/maine-public-utilities-commission">Maine Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/maine-puc">Maine PUC</a><span class="pur_comma">, </span><a href="/tags/marc-spitzer">Marc Spitzer</a><span class="pur_comma">, </span><a href="/tags/nstar">NStar</a><span class="pur_comma">, </span><a href="/tags/pjm">PJM</a><span class="pur_comma">, </span><a href="/tags/pjm-interconnection">PJM Interconnection</a><span class="pur_comma">, </span><a href="/tags/rto">RTO</a><span class="pur_comma">, </span><a href="/tags/scott-h-strauss">Scott H. Strauss</a><span class="pur_comma">, </span><a href="/tags/sep">SEP</a> </div>
</div>
Tue, 01 May 2007 04:00:00 +0000puradmin13949 at https://www.fortnightly.comThe Ultimate CEOshttps://www.fortnightly.com/fortnightly/2005/06/ultimate-ceos
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>The CEO Power Forum: Not all utility CEOs are created equal...</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Interviews by Richard Stavros</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 2005</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We take this to be self-evident after the bankruptcies, ratings downgrades, balance-sheet blowups, and financial debacles that took place in the industry in the last five years.</p>
<p>Those utility CEOs that kept the corporate ship sailing smoothly, growing their companies right through those turbulent times also evidenced this premise.</p>
<p>But while it's easy to judge in hindsight those that took on too much risk, bought too many plants, failed to execute their business plans, or were too ambitious, even a management guru might be hard-pressed to identify tomorrow's successful leaders.</p>
<p><span style="line-height: 1.538em;">The "back-to-basics" plan so well executed by the utilities in restoring investor confidence (and some executives say they never left back-to-basics) has had the unwanted benefit of once again painting the industry with a broad "plain-vanilla" brush.</span></p>
<p><span style="line-height: 1.538em;">While interest rates stay low and economic growth advances at a measured pace, utilities will continue to be the darlings of Wall Street, as a handful of utility indexes show single, and at times, double-digit increases in the last six months.</span></p>
<p>But some financial experts say such success cannot last forever. The party has to end. The record earnings multiples or price-to-earnings ratios being ascribed to the utility industry cannot last forever, they explain, as interest rates will rise, the economy will grow, and investors will cycle their investments.</p>
<p>Some say more consolidation is the answer. But others say that great leadership is the key to investor satisfaction, and that their companies will continue to enjoy high valuations and investments.</p>
<p>So, who comprises this next generation of leadership in the utilities industry? Who might very well change the industry's investment paradigm?</p>
<p><em>Public Utilities Fortnightly</em> has endeavored to find the "ultimate" CEOs-those who are blazing a new path for their companies and for the rest of the industry. We chose six CEOs as among the industry's brightest stars:</p>
<ul>
<li><a>Mayo A. Shattuck III</a>, CEO, Constellation Energy (Ticker: CEG)</li>
<li><a>Anthony F. Earley Jr.</a>, CEO, DTE Energy (Ticker: DTE)</li>
<li><a>James E. Rogers</a>, CEO, Cinergy (Ticker: CIN)</li>
<li><a>C. John Wilder</a>, CEO, TXU Corp. (Ticker: TXU)</li>
<li><a href="http://www.fortnightly.com/fortnightly/2005/06/ultimate-ceos-wayne-h-brunetti-xcel-energy">Wayne H. Brunetti</a>, CEO, Xcel Energy (Ticker: XEL)</li>
<li><a href="http://www.fortnightly.com/ultimate-ceos-lewis-hay-iii-fpl-group">Lewis Hay III</a>, CEO, FPL Group Inc. (Ticker: FPL)</li>
</ul>
<p>Many of these companies have bucked the industry trend and have pushed into businesses, markets, and practices that had been written off in the overreaction to deregulation. Constellation Energy's Shattuck and TXU Corp.'s Wilder are proving you can run a profitable company in competitive wholesale and retail electricity markets. Shattuck comes from the investment banking world and Wilder originally came from the oil patch, so they offer a new vision-and new language-for the industry.</p>
<p>FPL Group's Lewis Hay not only runs one of the most environmentally conscious companies-FPL is the largest wind-energy operator in the country-but his company is involved virtually in every competitive wholesale energy market around the country. Cinergy's Corp.'s James E. Rogers, whose thoughts on global warming are shaping the industry's view on the environment, has engineered one of the biggest mergers (with Duke Energy) in U.S. history, where he would become chief. DTE Energy's Earley shows how innovative he can be in finding new businesses and new opportunities within the utility industry, while Xcel's Wayne H. Brunetti is developing one of the most innovative technology programs in the industry.</p>
<p><em>Fortnightly</em> is pleased to present the industry's ultimate CEOs.</p>
<p><a>Mayo A. Shattuck III</a></p>
<p><a>Anthony F. Earley Jr.</a></p>
<p><a>James E. Rogers</a></p>
<p><a>C. John Wilder</a></p>
<p><a href="http://www.fortnightly.com/fortnightly/2005/06/ultimate-ceos-wayne-h-brunetti-xcel-energy">Wayne H. Brunetti</a></p>
<p><a href="http://www.fortnightly.com/ultimate-ceos-lewis-hay-iii-fpl-group">Lewis Hay III</a></p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/management-leadership">Management &amp; Leadership</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/people">People</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="https://www.fortnightly.com/sites/default/files/0506-FEA1.jpg" width="1058" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/anthony-f-earley-jr">Anthony F. Earley Jr.</a><span class="pur_comma">, </span><a href="/tags/baltimore-gas-electric">Baltimore Gas &amp; Electric</a><span class="pur_comma">, </span><a href="/tags/capgemini">Capgemini</a><span class="pur_comma">, </span><a href="/tags/cash-flow">cash flow</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/china">China</a><span class="pur_comma">, </span><a href="/tags/chrysler">Chrysler</a><span class="pur_comma">, </span><a href="/tags/cinergy">Cinergy</a><span class="pur_comma">, </span><a href="/tags/co2">CO2</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/constellat">Constellat</a><span class="pur_comma">, </span><a href="/tags/constellation">Constellation</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/credit-suisse">Credit Suisse</a><span class="pur_comma">, </span><a href="/tags/dsm">DSM</a><span class="pur_comma">, </span><a href="/tags/dte-energy">DTE Energy</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/ercot">ERCOT</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/ford">Ford</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/ghg">GHG</a><span class="pur_comma">, </span><a href="/tags/goldman-sachs">Goldman Sachs</a><span class="pur_comma">, </span><a href="/tags/ict">ICT</a><span class="pur_comma">, </span><a href="/tags/natural-gas">Natural gas</a><span class="pur_comma">, </span><a href="/tags/nerc">NERC</a><span class="pur_comma">, </span><a href="/tags/ot">OT</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/retail-competition">Retail competition</a><span class="pur_comma">, </span><a href="/tags/rto">RTO</a><span class="pur_comma">, </span><a href="/tags/security">Security</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/williams">Williams</a><span class="pur_comma">, </span><a href="/tags/xcel-energy">Xcel Energy</a><span class="pur_comma">, </span><a href="/tags/xel">XEL</a> </div>
</div>
Wed, 01 Jun 2005 04:00:00 +0000puradmin10887 at https://www.fortnightly.com